Pay inequity, particularly compensation disparity based on sex, has become a very prominent political issue in the last decade and it looks like some additional changes could be on the horizon at the federal level. Democrats expressed that pay equity would be a priority in their labor agenda during the 2018 Congressional election cycle and, in February 2019, a proposal intended to further promote fair pay practices was reintroduced in Congress. In addition, just last week, a federal judge lifted the stay on the changes to the Equal Employment Opportunity Commission’s (“EEOC”) EEO-1 Report. The revised EEO-1 report would require certain employers to provide pay data by sex, race, and ethnicity to the EEOC, allowing it to more easily detect and track impermissible pay differentials. Though at very different stages in their respective lawmaking processes, the proposed law and final regulation are very clearly intended to address pay inequality and provide additional enforcement tools.
Stay Lifted on EEO-1 Report
In August 2017, ahead of the 2018 submission deadline, the Office of Management and Budget (“OMB”) stayed collection of pay data based on race, ethnicity, and sex to allow it to review the regulation related to the lack of public opportunity to comment on the format of submission of the additional data and burden estimates related to the specific data file format provided. However, on March 4, 2019, a Washington, D.C. federal judge ordered the stay be lifted because she determined that OMB’s decision was arbitrary and capricious – citing unexplained inconsistencies based on its prior approval of the rule and failure to adequately support its decision. Continue reading
The U.S. Department of Labor (“DOL”) has officially curtailed another controversial interpretation of its dual jobs regulation that has plagued employers for more than decade – i.e. the 20% rule. This is welcome news for the hospitality industry and other employers who employ tipped employees, as the previous rule effectively forced employers to track and monitor the time that tipped employees spent on non-tipped tasks and “related duties.” Although the DOL issued an opinion letter rescinding its interpretation of the 20% rule in November 2018, the DOL’s recent revisions to its Field Operations Handbook has official dispelled lingering concerns about the DOL’s interpretation of the Fair Labor Standards Act’s dual jobs regulation and potential enforcement of the 20% rule.
The Tip Credit
Under the federal Fair Labor Standards Act (“FLSA”), employers must pay employees a minimum wage of $7.25 per hour. Various state wage and hour laws impose higher minimum wage requirements, but employers covered Continue reading
On November 8, 2018, the Department of Labor (DOL) issued an opinion letter retracting the controversial “80/20 rule” for tipped employees. Under this rule, if a tipped employee spent more than 20% of his or her working time performing “non-tipped” duties, his or her employer could not take a tip credit for time spent performing those non-tipped duties. The rule caused years of confusion, especially among employers. After all, what duties exactly qualified as “non-tipped”? Would folding napkins in between waiting tables count? And were employers expected to track every second of an employee’s day to determine if those non-tipped duties exceeded 20% of the total workday?
Under the DOL’s latest opinion letter on this issue, it has made clear that the it “do[es] not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the [Fair Labor Standards] Act are met.” Accordingly, employers should be able to breathe at least a sigh of relief. So how did we get here, and what should employers be able to expect in the new year?
By way of background, under the Fair Labor Standards Act (FLSA), “tipped employees” are defined as Continue reading
Hospitality employers nationwide continue to be hit with class action lawsuits alleging failure to properly pay/distribute tips, as well as failure to correctly characterize service charges and automatic gratuities. These lawsuits have the potential to result in verdicts or settlement amounts more costly than virtually any other employment-related matter. As a result, it is important to periodically review what is or is not permissible under the law is it relates to tips, service charges, and automatic gratuities.
Most employers are familiar with the basic premise that a tip is a voluntary amount a guest leaves for an employee over the amount due for the goods sold or services rendered, while a service charge is an amount agreed-upon in advance by a venue for services provided, often in connection with large pre-planned events. However, service charges are treated differently than tips for tax and other purposes, and automatic gratuities add an extra complicated layer in this analysis. A brief synopsis of the differences of these terms from a legal perspective is set forth below:
As most of our blog readers are aware, the Fair Labor Standards Act (“FLSA”) requires employers to keep records on wages, hours and other items, as specified in Department of Labor regulations. Most of the information is of the kind generally maintained by employers in ordinary business practice and in compliance with other laws and regulations.
In recording working time under the FLSA, infrequent and insignificant periods of time beyond the scheduled working hours, which cannot as a practical matter be precisely recorded for payroll purposes, typically need not be compensated. Until now, the courts have held that such periods of time are “de minimis” and thus need not be compensated. The FLSA’s de minimis rule applies only where there are uncertain and indefinite periods of time involved, a few seconds or minutes in duration, and where the failure to count such time is justified by industrial realities.
Under current law, D.C. employers are able to pay their tipped workers a base (sub-minimum) wage of $3.33 per hour, so long as the workers make enough in tips to push their earnings to at least the District’s minimum wage, which is currently $12.50 per hour. If the tipped worker does not earn at least the minimum wage for all hours worked, the employer is required to make up the difference.
However, on June 19, 2018, Washington D.C. voters approved Initiative 77, a contentious ballot initiative that would change this law. Specifically, this Initiative would raise the city’s minimum wage to $15 per hour and phase out the sub-minimum wage for tipped workers; it will gradually hike the tipped minimum wage by $1.50 each year until it reaches $15 in 2025, and by 2026, the minimum wage will be the same for all workers. Through this Initiative, the District of Columbia would become the first major city to outlaw the practice of allowing employers to pay a lower hourly wage to workers who earn tips, although that practice is unlawful in California, Oregon, Washington, Alaska, Nevada, Montana, and Minnesota. And officials in New York and Michigan are also considering ending their tipped-wage system this year.