Tag: FLSA

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3 Steps to Navigating Effective Wage and Hour Compliance

restaurant industry employees, wage and hour compliance for employers

Restaurant operators face many unique challenges — labor management being a top one.

In addition to today’s tight labor market, operators must also manage high employee turnover, complex scheduling as well as ever-increasing regulations around hour, wage and tip reporting requirements.

It’s no surprise that the restaurant industry continues to be a major target for Fair Labor Standards Act and class-action litigation. This type of litigation has proven to be costly in recent years as claims can be triggered by any number of employee complaints, including pay and hourly discrepancies.

In 2018 alone, the U.S. Department of Labor collected more than $42 million in employee back wages from the food services industry. This amount will only continue to increase as attorneys are now spending enormous resources on TV, radio, billboards and social media marketing campaigns to attract and inform hospitality employees on compliance violations.

Because much of the wage and hour legislation is new, and not coming off the back of federal law, there is little case history or precedence. And while there is a risk that employers do not pay their employees correctly under these new rules, the greater risk is that they do not have sufficient processes and auditable history in place to demonstrate compliance when challenged. This leaves restaurant operators vulnerable.

To avoid costly and time-consuming litigation, here are three steps restaurateurs can take now to better manage wage and hour compliance.

1. Begin internally: Start by educating managers on the statutory requirements for scheduling and paying employees, which can vary from city to city and state to state. For example, San Francisco, Seattle and the state of Oregon have started to implement “secure scheduling” or “predictive scheduling” ordinances. These rules require employers to provide schedules to employees up to two weeks in advance and extra pay if the schedules are changed. This creates a burden for employers who are not accustomed to being locked down so far in advance.

Once managers are up to speed on the current legislative landscape, conduct a thorough wage and hour audit to identify any existing or potential violations. The most common violations we see are the misclassification of employees as exempt vs. non-exempt status, the improper calculations of overtime wages for tipped employees, failing to maintain valid tip pools and the misuse of the federal tip credit.

The violations mentioned above are fairly easy to prevent; it simply takes commitment. Therefore, the last step should be to make compliance a companywide initiative by assigning responsibilities to someone internally or through an outsourced HR relationship. As the complexity of managing a workforce seems to grow exponentially each year with the addition of new legislation, continue to evolve internal processes and train managers to help ensure future compliance.

2. Enlist technology: In addition to scheduling requirements, operators are also required to manage employee breaks. For instance, in California, if a meal break starts just one minute later than required, the employer must pay an additional hour of pay to the employee. In New York, employers must pay an additional hour pay (called spread of hours) if the daily work schedule spans greater than 10 hours, regardless of the number of hours worked.

As pay and scheduling requirements vary depending on the location of the business, it’s nearly impossible for operators to manually manage multiple locations on their own. Restaurant-specific technology, with legislation and business rules built in, can enable operators to proactively manage compliance as well as provide an auditable history should claims of noncompliance arise. Utilizing technology can also help operators significantly reduce payroll errors as well as support and drive scheduling and time and attendance compliance efforts.

3. Educate employees: The expansion of restaurant locations and low unemployment has made it more difficult to find labor. These labor challenges often have a negative impact in the areas of training and enforcing best practices, areas that impact wage and hour compliance. Once you have finalized your company’s wage and hour-related policies — and have the technology in place to automate compliance — the final step is to effectively communicate these policies to your employees. Educating employees regarding their compensation, rights and obligations and encouraging them to come to management with any questions can help to significantly minimize future wage and scheduling claims. Policies can be communicated directly during daily shift meetings and through monthly training classes as well as in the employer handbook, which should be updated regularly.

With the daily demands of operating a restaurant, many lack the time needed to effectively manage wage and hour compliance. By following these tips, operators can significantly reduce their risk of noncompliance as well as more efficiently manage their business.

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Is It Legal to Dock the Pay of Employees Who Skip a Political Rally Being Held in the Workplace?

Jon Hyman The Practical Employer

Has an employer violated the law if it docks the pay of an employee who skips a speech being given by President Donald Trump in their place of employment?

Over the weekend news broke of a Pennsylvania employer who had an interesting way to influence its employees’ attendance at a rally Trump was holding at their place of employment during the work day. Only pay those employees who show up.

“NO SCAN, NO PAY,” a supervisor wrote to his employees.

While attendance at the rally wasn’t mandatory, the employer told its employees that they would only be paid for the work day if they attended. Otherwise, they had the option to take a PTO day or take the day off excused and without pay.

While it sounds terrible to withhold pay for employees who choose not to attend a political event during the work day, just because it’s terrible doesn’t make it illegal.

Indeed, in all likelihood, there is nothing illegal about this practice. That said, I can envision a few arguments that could give this employer trouble.

1. You might jeopardize an exempt employee’s overtime exemption. One of the cornerstones of the FLSA’s exemptions is that the employee must be salaried. By definition, a salaried employee receives the same predetermined amount of money for each week worked. Employers can jeopardize exemptions by docking employees’ pay for hours or days missed from work. If an employer reduces an employee’s pay for hours or days missed in a week, the employee is not receiving a standard predetermined amount for all work performed during the week, and therefore no longer salaried. If an employee is not salaried, he or she cannot be exempt. Exemptions are bad things to lose, because it would make an employee eligible for overtime. Thus, paying an employee four-fifth’s of his or her salary for a four-day work week might jeopardize that employee’s exemption.

2. You operate in one of the few jurisdictions in which political affiliation discrimination is illegal. “Political affiliation” is not a protected category protected by any federal law. Still there are a few states that protect it under their own anti-discrimination laws. In California, for example, an employee docked because he or she chose not to attend a rally of a politician they did not support would have a cognizable claim for political affiliation discrimination.

3. You’ve violated an employee’s right under section 7 of the National Labor Relations Act to engage in protected concerted activity. Private employers cannot prohibit discussions by and among employees about wages, benefits, and other terms and conditions of employment. Therefore, if employees skip the Trump rally as part of a mass protest over how his policies impact the workplace, then it might be unlawful for their employer to dock their pay as a result.

Legal or illegal, however, you need to ask yourself whether coercing employees’ attendance at a political event is a legitimate business practice. How you answer the question of whether you think it’s OK to try to shape or influence your employees’ votes helps to define the kind of employer you are. Voting is an intensely personal choice. I don’t think it’s my business how my family members cast their votes.

I certainly don’t think it’s an employer’s business how its employees cast their votes. Voting booths have privacy curtains for a reason. Exercise some discretion by not invading that privacy of your workers.
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Beware Pre-Shift and Post-Shift Workplace Activities

Jon Hyman The Practical Employer

In Integrity Staffing Solutions v. Busk, the Supreme Court held that the FLSA only requires employers to compensate employees for time spent performing pre-shift (preliminary) and post-shift (postliminary) activities that are “integral and indispensable” to an employee’s principal activities.

What are “integral and indispensable?” Those activities that are (1) “necessary to the principal work performed” and (2) “done for the benefit of the employer.”

In Busk, for example, the court held that post-shift security screenings were not “integral and indispensable” for an Amazon warehouse employee, because such screenings are not “an intrinsic element of retrieving products from warehouse shelves or packaging them for shipment,” and the employer “could have eliminated the screenings altogether without impairing the employees’ ability to complete their work.”

In light of these standards, consider Mireles v. Hooters of Am., LLC, filed late last year in a Houston federal court. A Hooters waitress claims that her employer unlawfully withholds pay for “postliminary” activities.

According to the lawsuit, Hooters requires its “Girls” to be “approachable, upbeat, and attentive to the needs of the guests as she socially engages with and entertains each individual guest at the front door and on the floor.” Accordingly, it requires that they spend substantial post-shift time “conversing with customers about topics unrelated to Defendants’ food and beverage offerings or local attractions, and spending substantial time waiting for managers to reconcile their sales receipts and tips towards the end of each shift.”

Are these waitresses entitled to be paid? Who knows. The point to be made runs much deeper.

There is a fine line between what is “integral and indispensable.” If the waitresses are required to be “attentive to the needs of the guests” and “socially engaging,” then I can craft an argument that time spent schmoozing post-shift should be compensated, just as I can make the point that such activities have nothing to do with the principal work of serving wings and beer. These off-the-clock cases are difficult, expensive and risky. If you lose, you’re not just paying your lawyer, but also the plaintiffs’ lawyer.

In other words, before you decide that your employees’ pre-shift and post-shift time is non-compensible, stop, take a deep breath, and call your employment lawyer.

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A Quick Review on Rules for Docking Pay for Exempt Employees

Jon Hyman The Practical Employer

“Can I dock part of an employee’s paycheck?”

It’s one of the questions I get most often from clients.

So, let’s take a quick run through the rules of docking employee’s pay for exempt employees.

Generally speaking, it violates the Fair Labor Standards Act to dock (that is, take a deduction from) the salary of an exempt employee. Under the FLSA, an exempt employee earns their entire salary for a work week as soon as that employee works even one minute during that week.

The logic is simple. Once you start deducting from an exempt employee’s salary for minutes or hours not worked, you are not treating that employee as salaried, but as hourly. And, hourly employees are not exempt. Therefore, if you don’t pay an exempt employee their entire salary for every work week in which any work is performed, then you are treating them as hourly and they are not exempt.

There are, however, seven limited exceptions permitting deductions from an exempt employee’s weekly salary:

    1. When the exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability.
    2. For absences of one or more full days occasioned by sickness or disability (including work-related accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability.
    3. While an employer cannot make deductions from pay for absences of an exempt employee for jury duty, attendance as a witness, or temporary military leave, an employer can offset any amounts received by an employee as jury fees, witness fees, or military pay for a particular week against the salary due for that particular week.
    4. For penalties imposed in good faith for infractions of major safety rules.
    5. For unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules imposed pursuant to a written policy applicable to all employees.
    6. For any time not actually worked during the first or last week of employment.
    7. For any time taken as unpaid FMLA leave.

It is critical for employers to understand these rules. A mistaken deduction could prove costly. Generally speaking, if an employer makes an improper deduction from an exempt employee’s salary, the exemption will be lost during the time period during which the improper deduction was made. Critically, the lost exemption does not only apply to the affected employees, but also to all employees in the same job classification working for the same managers responsible for the actual deduction.

Before you consider deductions from an exempt employee’s salary, consult with your employment counsel to make sure you have these rules covered and the deduction is proper.

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The FLSA’s Exemptions Are Becoming More ‘Fair’ for Employers

Jon Hyman The Practical Employer

In Encino Motorcars, LLC v. Navarro, the Supreme Court ruled that overtime exemptions under the Fair Labor Standards Act “are to be given a ‘fair reading,’ meaning they are not to be construed too narrowly” (as had historically been the case).

The court applied this “fair reading” standard to conclude that automobile service advisors are exempt under the FLSA’s automobile-service exemption.

Since Encino, federal courts have applied the “fair reading” standard to find that various classes of employee are non-exempt (or likely non-exempt) under various of the FLSA’s categories of exemptions:

Recently, the Department of Labor itself applied this “fair reading” standard to conclude, in an Opinion Letter [pdf], that the FLSA’s “retail or service establishment” exemption applies to sales representatives who sell credit-card-payment platforms to merchants.

Courts and the DOL are more willing than ever to conclude that employees are exempt under the FLSA. Yet, employers should not read this “fair” construction test as a license to reclassify all of their non-exempt employees as exempt. However, it should give employers some comfort that in closer cases, courts should not be so quick to conclude that they misclassified an employee.

Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. Comment below or email editors@workforce.com. Follow Hyman’s blog at Workforce.com/PracticalEmployer.

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Dropping Some Wage and Hour Wisdom on Turkey Giveaways

Jon Hyman The Practical Employer

One law firm for which I used to work provided each staff member an annual Thanksgiving turkey as a holiday thank you to its employees. With the hindsight of two decades of employment-law experience, here’s my question — should the fair market value of that turkey been included in the employees’ regular rate of pay? Because if it was, the company would have to include its value in the calculation of employees’ overtime rates.

Thankfully, the FLSA excludes such gifts from the regular rate of pay. Employers, your Thanksgiving turkeys and supermarket gift cards are safe from the clutches of the DOL’s Wage and Hour Division.

Under the FLSA, “regular rate” does not include “sums paid as gifts; payments in the nature of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or dependent on hours worked, production, or efficiency.”

To qualify under this exclusion, “the bonus must be actually a gift or in the nature of a gift. If it is measured by hours worked, production, or efficiency, the payment is geared to wages and hours during the bonus period and is no longer to be considered as in the nature of a gift.”

If the bonus paid at Christmas or on other special occasion is a gift or in the nature of a gift, it may be excluded from the regular rate under section 7(e)(1) even though it is paid with regularity so that the employees are led to expect it and even though the amounts paid to different employees or groups of employees vary with the amount of the salary or regular hourly rate of such employees or according to their length of service with the firm so long as the amounts are not measured by or directly dependent upon hours worked, production, or efficiency.

So, what does one have to establish such that a turkey or other holiday gift is excluded from the regular rate calculation?

  1. It is a discretionary gift.
  2. Its value is not measured by hours worked, production achieved, or efficiency attained.
  3. It can be provided with sufficient regularity such that employees expect it (i.e., an annual tradition), provided that it remains discretionary and not tied to hours worked, production, or efficiency.

I’m off the rest of the week to enjoy my turkey and fixings with my family. I hope you enjoy yours too. And, I hope you take you at least a few moments to reflect on that which you are thankful. So often we get bogged down in the everyday, which can prove to be both negative and mundane. One of the reasons I love Thanksgiving so much (other than my mother-in-law’s turkey) is because it gives you the chance to stop and reflect on all of the good that you have in your life. And we each have a lot of it.

Cheers.

Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. Comment below or email editors@workforce.com. Follow Hyman’s blog at Workforce.com/PracticalEmployer.

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What Happens to the New FLSA Salary Test Under President Trump?

Jon Hyman The Practical Employer

The one employment-law question I’ve been asked most since waking up last Wednesday to the reality that The Donald will be The President (aside from, “How did this happen?” and for that I direct you to 

The short answer? “No, it does not mean that.”

Beginning Dec. 1, the salary level for white-collar FLSA exemptions will increase to $913 per week, period. After all, the new regulations roll in on Dec. 1, and President-elect Trump does not become president until 51 days later. So, even if he wants to stop them from taking effect, he’s powerless to do so, and any legislative efforts would die at the hands of the current president’s veto.

The long answer, however, is a bit more complicated.

If you take a look at Trump’s campaign website, he has an entire page dedicated to “Regulations.” And Trump does not like regulations. What did his campaign promise he’d do to regulations once becoming president?
  • Ask all department heads to submit a list of every wasteful and unnecessary regulation which kills jobs … and eliminate them.
  • Reform the entire regulatory code to ensure that we keep jobs and wealth in America.
  • Issue a temporary moratorium on new agency regulations that are not compelled by Congress or public safety in order to give our American companies the certainty they need to reinvest in our community, get cash off of the sidelines, start hiring again, and expanding businesses. We will no longer regulate our companies and our jobs out of existence.
  • Decrease the size of our already bloated government after a thorough agency review.

If you ask any small business owner, the FLSA’s new salary test checks each of these Trumpian boxes.

Yet, this issue was not one on which Trump focused during the campaign. In the only campaign interview I could locate that touched on this subject, he did not call for repealing the upcoming FLSA changes outright, but instead called for “a delay or a carve-out of sorts for our small business owners.”
One possible solution? Take a look the bipartisan H.R. 5813, which would phase in the new salary test over four years, and eliminate its triennial re-indexing. If you are looking for potential models Trump might adopt, you could do a lot worse for a starting point.
The bottom line. You cannot, and should not, hope for a reprieve from these rules at the 11th hour. The new salary test is coming, regardless of what Trump may choose to do after the fact.
In other words, if you’re not prepared for these new rules, you better get prepared, and quickly, because in 16 days they become the reality of every business.
Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. Comment below or email editors@workforce.com. Follow Hyman’s blog at Workforce.com/PracticalEmployer.
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Don’t Forget the Fluctuating Workweek for Your Salaried Nonexempt Employees

Jon Hyman The Practical Employer

Are you still struggling with how to handle your currently exempt employees who, 

Let me offer a suggestion you may not yet have considered — the fluctuating workweek.

As an employer, you have two options to pay salaried, non-exempt employees:

    1. Under the standard method, you calculate the employee‘s weekly rate based on the salary divided by the number of hours worked that week, and then pay the employee 1.5 times that rate for all overtime hours. Thus, if a non-exempt employee earns a salary of $1,000 a week, and works 50 hours in a week, the employee would earn an additional $30 per hours worked over 40 ($1000 / 50 = $20 per hour base weekly rate x 1.5 = overtime premium of $30). Thus, in this week, the employee would earn an additional $300 for the 10 hours of overtime, rendering his total pay for that week $1,300, not the customary $1,000 salary.
  1. Under the fluctuating workweek method, you include the base-rate part of the overtime premium in the employee’s weekly salary, and only pay the 0.5 premium kicker as overtime. Using the same example as in number 1 above, the employee would still have an hourly rate of $30, but would only earn an additional $100 for the week, as under this method, $20 of the $30 overtime rate has already been paid as part of the base salary.

As you can see, there is a clear economic advantage to employers using the fluctuating workweek calculation to pay overtime to salaried non-exempt employees. You’ll realize a 66 percent savings on your overtime pay.

Under the FLSA, however, an employer cannot unilaterally implement the fluctuating workweek calculation. Instead, to pay salaried, non-exempt employees via this advantageous method, you must meet these four elements:

  1. the employee clearly understands that the straight-salary covers whatever hours he or she is required to work;
  2. the straight-salary is paid irrespective of whether the workweek is one in which a full schedule of hours are worked;
  3. the straight-salary is sufficient to provide a pay-rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours worked is greatest; and
  4. in addition to straight-salary, the employee is paid for all hours in excess of the statutory maximum at a rate not less than one-half the regular rate of pay.

Recently, the 11th Circuit court of appeals, in

What are the takeaways?

  1. If you haven’t yet determined how you will handle your currently exempt employees earning less than $913 per week, time is running out. You have 30 days from today to figure out and implement your strategy.
  2. If you have non-exempt salaried employees who work hours fluctuate from week-to-week, give strong consideration to implementing a fluctuating work week, via a written agreement that explains, in plain English the arrangement.
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Lawsuit Highlights the Risk of Unpaid Training Time

Jon Hyman The Practical Employer

Employment Law 360 reports that Hawaiian Airlines has been sued by a group of employees claiming that their mandatory unpaid 10-day customer service training course violated the Fair Labor Standards Act.WF_WebSite_BlogHeaders-11

According to court papers, trainees learned things like federal regulatory requirements and how to use a standard airline software system. … The suit claimed the Fair Labor Standards Act and state law required trainees be paid at least minimum wage “because, among other things, attendance was mandatory, the course material was related to the trainee’s job, and attendance was during regular working hours.”

For its part, the airline argues that the lead plaintiff “was well aware the course was unpaid before she started.” That’s not much of an argument. Under no circumstance may an employee voluntarily agree to forfeit pay to which the employee is entitled under the FLSA. It’s no different than asking an employee to volunteer his or her time and work for free (which, by the way, is very illegal).

Lots of opportunities exist for employees to train, take educational classes, or otherwise better themselves — inside classes, outside classes, seminars, lectures, and continuing education requirements, to name a few. Whether attendance at these activities counts as paid “working time” under the FLSA, however, depends on four factors:

  1. Is attendance outside of the employee’s regular working hours?
  2. Is attendance truly voluntary?
  3. Is the course, lecture, or meeting indirectly related or unrelated to the employee’s job?
  4. Does the employee not perform any productive work during such attendance?

An employer must be able to answer “yes” to all four of these questions to consider an employee’s attendance non-working time.

For non-exempt employees, this determination is important for two reasons. First, working time must be paid at the employee’s regular rate. Secondly, it counts towards the number of hours worked in a work week for determining overtime eligibility.
This issue is even more important in today’s tight economy. Failing to consider these factors before requiring or suggesting training or education for employees could result in the added expense of non-budgeted wages and overtime, as Hawaiian Airlines may soon discover.
Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. To comment, email editors@workforce.com. Follow Hyman’s blog at Workforce.com/PracticalEmployer.