On Monday, June 21st, the Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking (“NPRM”) that would alter regulations interpreting who is considered a “tipped employee” under the Fair Labor Standards Act (“FLSA”) yet again. Specifically, the NPRM proposes (1) to withdraw the dual jobs portion of the Final Rule promulgated in December 2020; and (2) a new regulatory framework by which to determine whether an employee is performing work that meets the definition of a tipped occupation and allows the employer to take a tip credit under the FLSA. Specifically, the FLSA allows an employer to pay a tipped employee less than the minimum wage – specifically $2.13 per hour under Federal law – only when the worker is engaged in a tipped occupation because the tips the employee receives should make up for the rest of minimum wage hourly rate. The NPRM creates a revised standard by which an employer would determine who is a “tipped employee” and for what portion of that employee’s work hours the employer can take a tip credit and pay the employee at the lower rate. The standard the DOL proposes to adopt generally reflects the interpretive guidance it maintained for decades before a new standard was established during the Trump Administration – the “80/20 Rule” – along with some other changes that the DOL asserts better define tipped work.
Background of the Dual Jobs Standard for Tipped Employees
Under the FLSA, “tipped employees” are defined as those employees who customarily and regularly receive more than $30 a month in tips. As stated, employers can pay tipped employees a reduced cash wage and claim a “tip credit” to make up the difference between the reduced cash wage and hourly minimum wage. When the DOL first published its regulations on application of the tip credit, it directly addressed the scenario where an employee has “dual jobs” under 29 C.F.R. 531.56(e) – two jobs for the same employer. In that situation, employers can take the tip credit only for the tipped job (i.e., the one routinely satisfying the $30-a-month provision). Later, the DOL revised its Field Operations Handbook (FOH), vastly broadening the scope of its “dual jobs” distinction by applying it to dual tasks. It stated that when “tipped employees spend a substantial amount of time (in excess of 20%) performing preparation work or maintenance, no tip credit may be taken for the time spent in such duties.” This is what’s known as the “80/20 rule.”
The legal landscape facing employers seems as difficult to navigate as it has ever been. Keeping track of the ever-changing patchwork of federal, state and local laws governing the workplace may often seem like a full-time job whether you are a human resources professional, in-house attorney or business owner. Change appears to be the one constant. As President Trump’s Administration comes to an end, employers will continue to closely track the changes taking place at the NLRB, the DOL and the EEOC. At the same time, a number of states will continue introducing new laws and regulations governing workplaces across the country, making it more important than ever for employers to pay attention to the bills pending in the legislatures of the states where they operate. This complimentary webinar series will focus on a host of the most challenging and timely issues facing employers, examining past trends and looking ahead at the issues most likely to arise.
To register for an individual webinar in the series, click on the link in the program description below. To register for the entire 2021 series, click here to send us an email request, and we will register you. If you missed any of our past programs from our annual Labor and Employment Webinar Series, click here to subscribe to our YouTube channel to access those webinars.
The recent action by the Pension Benefit Guaranty Corporation (“PBGC”) to rein in run-away filing fees imposed by the American Arbitration Association (“AAA”) brings to mind Homer Simpson’s declaration that alcohol was “the cause of, and solution to, all of life’s problems.” In a like manner, the PBGC can be seen as the cause of, and now (happily) the solution to, the very steep filing fees previously imposed by the AAA on withdrawn employers.
By way of background, for many years, employers assessed withdrawal liability faced a Hobson’s choice: either pay the fees demanded by the AAA to initiate arbitration, or forego any chance to challenge the assessment. Of course, by failing to initiate arbitration, the amounts demanded by the pension fund become, in the words of the statute, “due and owing on the schedule set forth by the plan sponsor.”
This unpleasant situation for employers – pay up, or else – was set in motion by a PBGC regulation that allows pension funds to impose the AAA rules (and the required filing fees) on withdrawn employers. That regulation purports to allow Continue reading →
Earlier this week, on January 12, 2020, the U.S. Department of Labor (DOL) announced the release of its final rule revising and updating its regulations interpreting joint employer status under the Fair Labor Standards Act (FLSA). According to DOL, “The final rule provides updated guidance for determining joint employer status when an employee performs work for his or her employer that simultaneously benefits another individual or entity, including guidance on the identification of certain factors that are not relevant when determining joint employer status.” The DOL published its Notice of Proposed Rulemaking (NPRM) on April 9, 2019, and received over 12,000 comments within the 30-day comment period. The final rule becomes effective on March 16, 2020, 60 days after publication in the Federal Register today, January 16, 2020.
As a threshold matter, under the FLSA, an employee working for one company may be found to be the joint employee of a second, independent company, depending on the nature and extent of control over the employee’s work. Joint employer status is important for numerous reasons, including the fact that a joint employer can be held joint and severally liable for FLSA wage and hour obligations. In 1958, DOL published an interpretive regulation, 29 C.F.R. § 791, explaining that joint employer status depends on whether multiple persons are “not completely disassociated” or “acting entirely independently of each other” with respect to the employee’s employment.
Specifically, the regulation provided three situations where two or more employers are generally considered joint employers: (1) where there is an arrangement between the employers to share the employee’s services (e.g., to interchange employees); (2) where one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee; or (3) where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. The DOL issued its NPRM out of concern that Continue reading →
Recently, the Social Security Administration (SSA) resumed their practice of sending Employer Correction Requests (informally “no-match letters”) to employers advising them that information submitted on an employee’s Form W-2 does not match SSA records. The SSA stopped sending no-match letters in 2012, but in recent months, employers across many industries have received letters.
The no-match letter states that there is an error with at least one name and the Social Security Number (SSN) on a W-2 that is submitted by the employer. Importantly, the no-match letter does not imply that the employer or the employee intentionally reported incorrect information. They are educational in nature to advise employers that a correction may be needed for the SSA to post the correct wages to the right record because discrepancies could occur due to typographical errors, unreported name changes (such as changes due to marriage or divorce) and inaccurate employer records.
If your company has received a no-match letter, consider taking the following action: Continue reading →
In 1997, the U.S. Supreme Court decided the case of Auer v. Robbins, establishing the standard for what has become known as Auer deference (or Seminole Rock Deference from Bowles v. Seminole Rock and Sand Co. (1945)). This decision and the standard it set is significant for employers because it gives substantial latitude to federal agencies, like the Department of Labor, to interpret their own ambiguous standards. Specifically, in Auer, the Supreme Court held that an Agency’s, in this case the Department of Labor, interpretation of its own standards is “controlling unless ‘plainly erroneous or inconsistent with the regulation.’” In other words, if it’s not clear what is required by the plain language of the standard, the Court will generally defer to the Agency’s own reasonable interpretations of its regulations.
However, the Supreme Court will now have the opportunity to reconsider Auer deference in the case of Kisor v. Wilkie. On December 10, 2018, the Court agreed to review Question 1 of the petition for certiorari, which specifically asks “[w]hether the Court should overrule Auer and Seminole Rock.” Continue reading →