The Dangers of Using Two Different Time Clocks

It seems it would be a no-brainer.  You have one employee who works two different shifts, or even two completely different jobs.  You set the employee up on two different time clocks so you can track the time the employee spends in each position.  This can be helpful, especially if the employee is working at two different rates.  However, what if the employee works over 40 hours in a workweek on the two positions combined.  Is the employee entitled to overtime pay?  

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Under New York Law, Are You Required to Pay Your Employees for Their Breaks or Not?

As noted in our recent blog, Under Federal Law, Are You Required to Pay Your Employees for Their Breaks or Not?, various states and localities may have their own break laws and regulations that could apply to your business.  Those laws could cause even more confusion with as to if, whether to pay employees for breaks and/or meal time.  New York is among the states with specific laws on breaks.  

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Under Federal Law, Are You Required to Pay Your Employees for Their Breaks or Not?

An area of confusion for many employers, and thus an area in which wage and hour laws are often violated, involves breaks and meal periods.  Specifically, are employers required to pay their employees for break and/or meal time, and if so, when? This area of confusion has resulted in Auto Cricket Corp., doing business as AutoCricket.com, paying 414 employees a total of $76,589 in back wages following an investigation by the U.S. Department of Labor's Wage and Hour Division.  

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Are You Paying Your Workers Enough?

Minimum wage is still an issue for many employers, as two agriculture employers recently learned.  And willful, repeated violations of the law can cause the U.S. Department of Labor (“DOL”) to make a federal case of the issue. 

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How Not To Respond To A DOL Audit: Fur Company Gets Its Hide Tanned By the DOL

Accused of doing just about everything wrong possible under the wage and hour law, a Boston processer of hides and furs is being sued by the DOL in federal court seeking $1,000,000.00 in back wages and damages.  According to the DOL, the company engaged in repeated “knowing, deliberate and intentional violations.” 

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Lawsuits by Restaurant Employees Keep on Coming

As discussed in our previous blogs, complaints by restaurant employees seem to be a big trend, and that trend seems to only continue to grow – and not only in New York City.  

 
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Lawsuits by Wait Staff is the Latest Big Trend in the NYC Restaurant Scene

Running a successful restaurant is not for the faint of heart. Indeed, nationwide, most new restaurants close within their first year—industry experts put the failure rate at anywhere from 60 to 80 percent.  And if you happen to be fortunate enough to own a successful New York City restaurant, you have an additional hurdle to overcome—the risk of being subject to a lawsuit by your wait staff.  After all, NYC restaurants have become a frequent target of their disgruntled employees armed with ambitious attorneys alleging wage and hour violations. 

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Misapplied Overtime Exemption Can Result In Millions of Dollars in Payments For Wage Violations

The U.S. Department of Labor (DOL) announced on May 1, 2012, that in accordance with a settlement agreement, Wal-Mart Stores Inc. has agreed to pay $4,828,442.00 in back wages and damages to more than 4,500 employees nationwide and $463,815.00 in civil money penalties for misclassifying employees and associated violations of the overtime provisions of the Fair Labor Standards Act (FLSA), the federal wage and hour law.  

 

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There's More Than One Way to Sink a Ship

Following an investigation by the Department of Labor’s Wage and Hour Division , Norwegian Cruise Line is being asked to pay $526,602.00 in back wages.

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The Danger of Unpaid Interns

In another of what appears to be a potential series of internship-related wage and hour violation lawsuits, a former intern is suing the Hearst Corporation, claiming that her unpaid internship violated the Department of Labor’s regulations.

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"Black Swan" Unpaid Interns Raising Legal Issues

Two former interns on the set of the movie “Black Swan” brought a class action lawsuit against Fox Searchlight Pictures, alleging that their work as unpaid interns crossed the line into work for which they should have been compensated.

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Ongoing DOL NY Restaurant Investigation Finding Repeated Violations

In a further example of industry-specific targeting for wage and hour violations, the Department of Labor issued a press release regarding a multi-year investigation of the full-service restaurant industry on Long Island, NY, finding multiple violations in numerous establishments.

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New Jersey Gas Stations Target of DOL Investigation

The federal Department of Labor recently recovered $1,014,895.00 in back wages for 295 gas station employees in New Jersey, according to a recent DOL News Release. 

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New Jersey Inadvertently Eliminates Long-Standing Exemption for Commissioned Sales People and Aligns Exemptions With Federal Law

In an effort to bring its definitions for white-collar employees exempt from the overtime pay regulations into line with the federal definitions, New Jersey inadvertently eliminated a long-standing exemption for commissioned sales people.

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Subcontracting Trouble: Can Your Subcontractors' Employees Be Considered Your Employees for Wage and Hour Purposes?

If a company subcontracts some of its functions, can that company be liable for its contractor’s violations of labor law? In a word—yes. Especially when those functions are provided on-site and the companies are found to be a joint employers.

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800,000 Reasons to Not Do What This Restaurant Did

The U.S. Department of Labor recently offered employers a legal cautionary tale of how not to pay employees when it hit a Long Island, New York restaurant with $800,000.00 in back wages and overtime pay liability, liquidated damages, and civil fines because

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Overtime Compliance Must Be Taken Seriously - Damages Are Severe And Potentially Crippling For A Business

Some employers think that overtime compliance is optional and even a luxury, especially in a difficult economy. But think again. Failing to comply with the overtime laws could invite an audit by the state or federal department of labor, which in itself is an expensive and invasive process.  

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Second Circuit Deals Novartis a Costly Blow

In another decision addressing the rampant misuse of the outside sales and administrative exemptions by companies, the Court of Appeals reversed a prior favorable decision for Novartis in In re Novartis Wage and Hour Litigation. The Court found that the sales representative were neither exempt outside sales people nor exempt administrative employees.

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Having Trouble Finding Recent DOL Opinion Letters?

If you’ve been having trouble finding recent U.S. DOL wage and hour opinion letters, you are not alone. In fact, the DOL has not issued an opinion letter regarding the FLSA since January 16, 2009 (when it also curiously withdrew 14 of them for “further consideration”).  What happened? The DOL determined that it is no longer going to be issuing wage and hour opinion letters.

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DOL Enforcement Effects on the Rise

The Department of Labor ("DOL") earlier this year announced that it would be hiring 250 additional investigators in an effort to pursue violators of minimum wage, overtime and meal break laws throughout the country. The news that the DOL is increasing their audits of employers that are not paying employees proper amounts of compensation is nothing new to both labor and employment lawyers as well as employers themselves.  It seems that new audits and fines are being reported on a daily basis.   

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Work for Related Employers Can Cause Joint Employer Liability

Boston-based Partners HealthCare Systems and its 14 affiliated hospitals and health care companies recently signed a consent decree in federal district court agreeing to pay $2.7 million in back wages to 700 employees to resolve an overtime lawsuit filed by the U.S. Department of Labor (“DOL”).

The interesting twist in this lawsuit was that Partners HealthCare contacted the DOL itself after realizing that perhaps affiliated entities sharing employees had run afoul of statutory overtime requirements under the Fair Labor Standards Act. Indeed, they had. The DOL’s investigation confirmed that defendants failed to combine hours worked on separate payrolls for employees who provided services for two or more defendants during a single workweek.  

Evidently, there existed a joint employment relationship between these entities. The analysis was based on some of the following factors:

  • Whether an arrangement existed between employers to share the employee;
  • Whether the companies acted in the interest of one another in relation to the employee;
  • Whether the companies shared control of the employee’s employment;
  • Whether there was common ownership of the employers; and
  • Whether there was common management of the employers.

No single factor is controlling in joint employment cases. Courts, as well as the DOL, look at the “economic realities” of the work relationship to determine if a joint employer relationship truly exists. 

Partners HealthCare may actually have been lucky – or wise – in this situation. By bringing the matter to the attention of the DOL itself, Partners HealthCare may have saved itself liquidated damages and attorneys’ fees that would likely have resulted had the lawsuit been brought by an attorney on behalf of its employees.

Time Record Retention: The Proof is in the Employer's Pudding

In recent years, the U.S. Department of Labor (“DOL”) has informally partnered with advocacy groups and grassroots organizations of various states on behalf of workers.  This has engendered a more proactive DOL, resulting in more cases, and more importantly, more fines.  Employers that do not maintain employee time records, or keep shoddy time records are feeling the brunt of this increased enforcement. 

The problem with poor time record retention is simple.  If an employer fails to maintain accurate time records, an employee’s credible testimony or other evidence concerning his or her hours worked will be sufficient to prove an overtime claim.  The burden of proof then shifts to the employer to show that the hours claimed were not worked.  Challenging the employee’s assertion is a difficult burden without records to back up the employer. 

This may have been part of the reason carwash chain Lage Management Corporation agreed in late June to pay $3.4 million in back wages and liquidated damages to almost 1200 current and former employees to settle a lawsuit brought by the U.S. Department of Labor in August 2005.  This amount was in addition to the $1.3 million in back wages and damages it had already paid to 200 other employees in three previous settlements in this matter. 

Although there appears to be a multitude of FLSA violations occurring at Lage Management Corporation carwashes, the inability to provide adequate time records probably doomed these carwashes from the start.  The takeaway is simple.  For employers who are properly paying employees for the work they provide, maintaining and ensuring that time records are accurate will help them defend themselves against future claims, respond to government requests for information, and avoid penalties for failure to comply with applicable laws.    

Wage and Hour Compliance Improving in Kosher Food Industry

Last year’s revelations regarding certain common  immigration and wage and hour violations within the kosher meat processing industry has led social justice groups within the Jewish community to take responsive action. Motivated mainly by Jewish legal and ethical imperatives, these groups are seeking to acquaint kosher processors with the law and prevent violations, like those notably discovered at the Agriprocessors plant located in Iowa last year. 

Among the steps they have taken is to devise a new “ethical seal” of approval for display by kosher restaurants and eating establishments. One such seal is known as “Tav HaYosher,” and is intended to indicate the establishment’s adherence to wage and hour law, particularly in the areas such as minimum wage, overtime pay, work breaks and tip distribution for those employees who mainly rely on tips. 

Reflecting its ethical component, the seal also conveys that the workers are treated humanely. The seal would be provided to establishments that meet detailed guidelines, and may include detailed inspections similar to those that are conducted in Israel by trained compliance monitors. A companion effort geared to kosher food manufacturers would place a “Hekhsher Tzedek” seal on food that is manufactured in accordance with the kosher laws as well as underlying Jewish ethical standards. 

Much has been made of the need to comply with federal and state wage and hour laws in order to avoid employee lawsuits, agency audits, and diminished employee morale. Although these practical considerations should be reason enough to motivate employers to comply with the law, needless to say, that is not always the case. The soul-searching engendered in certain portions of the Jewish community after the alleged processing plant abuses came to light suggest that ethical and moral considerations might provide certain employers with a separate (and perhaps more powerful) motivation to follow civil laws related to paying workers properly and treating them with dignity.

Assessing the Impact of Massachusetts' Mandatory Treble Damages in Wage Cases

On July 13, 2008, Massachusetts’  Act to Clarify the Law Protecting Employee Compensation  went into effect, making the Commonwealth the first state to mandate treble damages in wage cases. The Act also mandates that costs and attorneys fees be awarded in addition to treble (triple) damages in all successful civil lawsuits filed under Massachusetts' wage payment, prevailing wage, minimum wage, overtime, weekly wage and other miscellaneous wage-related laws. Previously, Massachusetts judges had the discretion to award treble damages, but considered such issues as whether employers had acted in good faith and whether violations had been willful. Prior to the new Act, judges followed the precedent set by the Massachusetts Supreme Court in Wiedmann v. The Bradford Group, Inc. [444 Mass. 698 (2005)], which established the option to award treble damages for willful violations only.

The Act has now been in effect for close to a year. Some predicted would drive business out of the Commonwealth and/or make it the venue of choice for class action wage and hour cases. Our informal survey of Massachusetts attorneys suggests that the most significant impact of the Act has actually been to move employers to the settlement table more quickly. 

Also, in January of this year a bill was introduced in the Massachusetts House of Representatives at the behest of the Associated Industries of Massachusetts (AIM) that would amend the Act to add one crucial word – “willful.” The bill, which currently languishes in the Joint Committee on Labor and Workforce Development, would amend the bill to mandate treble damages only in the case of willful violations. With the same governor who permitted the Act to become law still in place, it remains to be seen whether this bill will have legs. 

The Massachusetts Treble Damages Act is part of a wave of increased legislation and enforcement of wage and hour laws at the state level that is presently sweeping across the country. Employers, particularly in Massachusetts, need to take compliance very seriously in the current climate.

Employees Need to Be Compensated for "Off-the-Clock" Work

In an all too familiar scenario, another large wireless operator has been forced to pay back wages for overtime work. This time, Sprint (which has paid out millions in collective action wage suits in recent years) paid a $120,000 fine after a federal labor investigation revealed that non-exempt employees at a call center in a Bristol, Virginia were not paid for “off-the-clock” work. 

Courts have held in similar situations at telecommunications companies (including Sprint) that “off-the-clock” work call center employees must do before they can take their first call of the day – booting up their computers, logging onto the company's network, opening computer programs and reviewing company e-mails –  constitutes preliminary work that is necessary to the principal activity performed by these individuals. Since this preliminary work is done for the benefit of the employer, it is compensable under the Portal-to-Portal Act. While the Sprint fine was based on an average of only 9 minutes per employee per day of unpaid time, a class action lawsuit just filed by former employees of a call center operated by APAC Customer Services, Inc. in La Crosse, Wisconsin alleges that employees (who engaged in the same type of activities before clocking in as the Sprint workers) were underpaid for 45 minutes per day for three years – and APAC has around 9,000 workers who could join this suit.  

Lawsuits in such situations have been more frequent and successful in recent years. This may be the result of the 2005 U.S. Supreme Court decision, Alvarez v. IBP [546 U.S. 21 (no. 03-1238)],which affirmed that when non-exempt employees perform “integral and indispensable” activities for their employer's benefit, their workday begins, and it continues until they complete their last task of the day.

The takeaway is simple. Companies must be aware of what non-exempt employees are doing before they officially “begin” the workday. Companies should develop a policy that ensures that non-exempt employees are not permitted to begin work prior to their regular starting time (or continue working after their ending time). However, employees who break the rules, even if they are disciplined, may be entitled to be paid for unauthorized overtime work in certain situations. Thus, workplace policies alone are not enough – companies must monitor and enforce these policies to avoid liability.

"Joint Employers" May Be Liable in Wage & Hour Cases

From a legal standpoint, when does a company become a “joint employer” of its subcontractor’s workers? When can a company be held liable for the wage and hour law violations of its subcontractors: When it uses subcontracted workers alongside its own? When it employs a subcontractor’s entire workforce? How about when it merely subcontracts cleaning, landscaping, or other services peripheral to the company’s business?

On April 28, 2009 the New York State Department of Labor’s Apparel Industry Task Force raided the premises of Suburban Textiles, Inc. and confiscated the property of Suburban and one of its prime subcontractors, Technical Garment USA Co. The NYS DOL charged Suburban with breaking a number of labor laws, and Technical Garment with major wage and hour violations. It remains to be seen whether the NYS DOL will file wage and hour claims against Suburban as a “joint employer” of Technical Garment’s workforce. Joint employment liability is currently a major concern for employers who make significant use of subcontractors either to complete certain steps in a production process or to undertake work that lies outside of the company’s core competencies.

The fact pattern that gave rise to the Suburban bust bears a certain resemblance to circumstances that led to the 2nd Circuit’s seminal 2003 decision in Zheng v. Liberty Apparel, 556 F.Supp.2d 284, in which the Court set a new precedent by expanding the definition of “joint employer” under the FLSA. In Zheng, the Court found that to determine whether a joint employment relationship exists, it is necessary to consider “the circumstances of the whole activity” in light of “economic reality.” The Court identified six factors that should be evaluated in making the joint employer analysis:

  •  Workplace and equipment belong to the client company – This suggests that the client company may be a joint employer because a legitimately “independent” subcontractor usually works off premises and uses its own equipment.
     
  • Subcontractor can and does shift its entire staff from one client to another – This suggests that the client company may not be a joint employer, because a legitimately “independent” subcontractor can have its crew do a job for one client, followed by a job for another client, etc.
     
  • Work performed is integral to the client company’s product – The more integral the subcontractor’s work is to the client company’s finished product, the more likely that the client company will be held to be a joint employer.
     
  •  Employment contract permits work to be shifted from one subcontractor to another – If the same employees keep working for the same client company even though the name of subcontractor changes, the client company may be the “true” employer, and the subcontractor with revolving names may be a “sham.”

  •  Client company supervises work – The more control the client company has over workers, the more likely that it is a joint employer. This is the most important factor to many courts and government agencies.
     
  • Subcontractor works almost exclusively for client company – This suggests that the client company may be a joint employer, because a legitimately “independent” subcontractor has multiple clients.

In recent years, the U.S. Department of Labor has been cracking down on joint employers in FLSA cases. In subsequent action in Zheng, the U.S. District Court S.D.N.Y. permitted plaintiffs to introduce expert testimony by a US DOL investigator alleging that the principal reason garment manufacturers use subcontractors in the manufacturing process is to avoid liability for wage and hour violations. The government is looking to expose sham subcontracting arrangements that exist just to shield the client company from wage and hour, immigration and other employment laws.

Companies that rely heavily on subcontractors should never turn a blind eye to employment practices that could subject them to liability. They should also keep subcontractors at arms length, and refrain from giving explicit direction to subcontractors’ workers. The joint employment analysis is very similar to the consideration of which workers are “independent contractors” and which are “employees” – truly independent subcontractor management and operations are key.

No Security for Employers in GAO's Report on DOL WHD Problems

 As has been widely reported, a March 25, 2009 report by the U.S. Government Accountability Office (“GAO”) slammed the Wage and Hour Division (“WHD”) of the U.S. Department of Labor for inadequate response to and investigation of wage complaints. While the press coverage on this report has credited the GAO with suggesting that an employer only has 1 chance in 10 of being held accountable when an employee makes a legitimate wage complaint to the WHD, this interpretation is based on a cursory reading of the report – and this report does not tell anything like the whole story of the current state of wage and hour law enforcement in this country.   

The “1 case in 10 handled correctly” story is based on a portion of the GAO’s investigation that involved a sting operation with exactly ten bogus cases, i.e., not a particularly large sample for analysis. Moreover, these 10 fictitious complaints were brought to WHD field offices in only 6 states – Alabama, California, Florida, Maryland, Texas and Virginia. The one complaint that the GAO felt the WHD handled properly was addressed by a California field office; in another California complaint the field office investigated as required and arranged for the “employer” to pay the “employee” back wages, but the GAO judged the case to be mishandled due to recording errors in the WHD database. 

The rest of the GAO’s investigation consisted of a review of WHD files on 230 randomly-selected cases concluded between October 1, 2006 and September 30, 2007, 20 of which the GAO determined to have been inadequately investigated – thus, in this limited sample, 9 cases out of 10 apparently met the GAO’s standards. While the details of all the mishandled cases described in the report are shocking, it is hard to tell from the data the report provides how widespread poor WHD practices really were during the periods investigated.
 
There are also a couple of other important caveats to be considered: A shake-up of the WHD and the addition of 250 field investigators has already been announced by Labor Secretary Hilda Solis and the new administration has made it clear that it is serious about undertaking new workers’ rights initiatives. Also, many states, including New York, New Jersey, Connecticut and Pennsylvania, aggressively prosecute wage claims under their own wage and hour and wage payment laws. Finally, there has been a recent explosion in the number of private individual and class action lawsuits based on overtime and other wage claims. Employers certainly can’t rely on any perceived ineptness by the federal government to protect them from liability for their errors in compensating employees.