California Employment Law Update for 2019 

By: Andrew J. Sommershutterstock_150165167

In the final days of California’s 2018 legislative session, and the end of his term, Governor Jerry Brown has signed into law a variety of employment bills, including a flurry of new legislation seeking to bolster the state’s workplace harassment laws in the aftermath of the #MeToo movement.  Conn Maciel Carey LLP provides this summary of key new employment laws impacting California private sector employers.  Unless otherwise indicated, these new laws just took effect on January 1, 2019.

#MeToo Legislation

Expanded Anti-Harassment Training Requirements

Existing law requires that employers with 50 or more employees provide at least two hours of sexual harassment training to all supervisory employees within six months of the individuals becoming supervisors, and at least once every two years thereafter.  Covered employers must provide classroom or other effective interactive training that incorporates the topics of sexual harassment and abusive conduct as well as harassment based on gender identity and expression and sexual orientation.

Senate Bill (SB) 1343 broadly expands the harassment training requirements to small employers and for the first time requires training of non-supervisory employees.

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DOL Says Goodbye to the 80/20 Rule for Tip Credits

On November 8, 2018, the Department of Labor (DOL) issued an opinion letter retracting the controversial “80/20 rule” for tipped employees.  shutterstock_losing moneyUnder 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

Tips, Service Charges, and Automatic Gratuities Continue to Cause Problems for Employers

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.  shutterstock_waiter

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:

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California Court Negates FLSA’s “de minimis” Rule

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.

Clock

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.

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DC Voters Approve Measure Eliminating Sub-minimum Wage for Tipped Employees

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 waiterreaches $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.

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SCOTUS Approves Class Action Waivers in Employment Arbitration Agreements

By:  Kara Maciel and Dan Deacon

The U.S. Supreme Court ruled on Monday that class/collective action waiver clauses in employment agreements that compel employees to settle disputes individually with a third-party arbitrator are enforceable.  In a landmark 5-4 ruling, the Justices in the majority rejected the National Labor Relations Board’s position and held that a class/collective action waiver in an arbitration agreement – which effectively prohibit employees from joining together in a class or collective action lawsuit to settle disputes – do not violate the Federal Arbitration Act (“FAA”) or the National Labor Relations Act (“NLRA”).

Background

Arbitration agreements – requiring employees to submit claims to an arbitrator instead of filing in court – are relatively common in the workplace.  Many employers favor arbitration because it tends to lower the cost of litigation and streamlines a resolution.

The legal issue that percolated through the federal Courts of Appeals over the past several years was whether a class/collective action waiver in an arbitration agreement is enforceable.  An arbitration agreement that includes a class/collective action waiver benefits an employer because it prevents employees from banning together to file costly class or collective actions and it forces employees to utilize the arbitration process rather than filing a lawsuit.  Thus, the only form of redress for an employee is a single action that must be worked out before a neutral, third-party arbitrator.

Over the past five years, the Courts of Appeals issued conflicting opinions on whether class action waivers are enforceable.   Notably, between 2013 and 2014, employers were provided favorable opinions from the U.S. Courts of Appeals for the Fifth, Second, and Eleventh Circuit which concluded that the NLRA does not invalidate class action waivers in arbitration agreements.  In contrast, in 2016, the U.S. Courts of Appeals for the Ninth and Seventh Circuit adopted the NLRB’s position that class and collective action waivers violate Section 7 of the NLRA.

The Supreme Court’s Decision

The Supreme Court’s ruling brings finality to an issue that sparked years of debate and caused significant uncertainty for employers.  Oral arguments took place in October 2017 with the justices appearing split along ideological lines – except for Justices Clarence Thomas and Neil Gorsuch who did not speak at all during the session.  Interestingly, however, it was Justice Gorsuch who wrote the opinion – which was his first major opinion since joining the Court last spring.

As alluded to in our prior blog post, President Trump’s ability to fill Justice Scalia’s vacancy was ultimately a deciding factor in what appears to have been a partisan showdown.  Speaking for the conservative wing on the bench, Justice Gorsuch explained that the law is clear that Congress in enacting the FAA instructed federal courts to enforce arbitration as written, including those terms calling for individualized proceedings, and that the “decision does nothing to override” what Congress has done.  In a lengthy dissent, Justice Ginsburg criticized the majority for overturning 80 years of NLRB precedent.  Justice Ginsburg commented that the majority’s decision is “egregiously wrong” and expressed concerns that many employees with small claims, such as minimum wage and overtime violations, will be disinclined to pursue potential claims individually.

The expected fall-out and the future of this ruling now rests with Congress.  Congress certainly has the ability to revise the FAA and the NLRA through legislation.  Given the deep split amongst party lines, however, it is unlikely that Congress will act any time soon.

Take Aways for Employers 

In light of the Court’s decision, employers should immediately review their practices and policies governing employment agreements with arbitration clauses.  For those employers who do not require arbitration of disputes, now may be the time to reconsider whether to implement such an agreement with current employees.  For those employers who have arbitration agreements in place already, now is the time to ensure the agreement contains an enforceable class/collective action waiver, especially for wage and hour disputes.  Employers may want to evaluate whether to restrict class/collection actions for other types of disputes, such as discrimination or harassment cases.  Importantly, any arbitration agreement must be drafted with the company culture in mind.

In short, employers now have the ability to utilize a new forum to resolve legal disputes on an individual basis.  In some circumstances, especially for class/collection claims, an arbitration may be less expensive than lawsuits, take less time, and do not typically result in years of appeals.  Ultimately, the Supreme Court’s decision is welcome news for employers.  Employers can proactively mitigate litigation risk through carefully drafted employment agreements and more effectively manage legal disputes.

Conn Maciel Carey Welcomes Former CSB Attorney-Investigator to the Firm

beeta lashkariWashington, D.C.-based Labor & Employment and OSHA / Workplace Safety boutique law firm Conn Maciel Carey LLP is pleased to announce that Beeta B. Lashkari has joined the firm as an attorney in its Washington, D.C. office.

Ms. Lashkari, a former attorney-investigator at the U.S. Chemical Safety and Hazard Investigation Board (CSB), has extensive experience handling government investigations and is equipped to defend clients in an array of matters before federal, state, and local government agencies, including OSHA 11(c) and whistleblower retaliation claims and EEOC investigations and enforcement actions.

Ms. Lashkari will assist the Labor and Employment practice group in advising and representing clients in a wide-range of inspections, investigations, and enforcement actions, including those from the EEOC, the Department of Labor’s Wage and Hour Division, the U.S. Occupational Safety and Health Administration (OSHA), the U.S. Environmental Protection Agency, the CSB, and state and local employment agencies.  In addition to her work with the Labor and Employment practice group, Ms. Lashkari will assist the OSHA Workplace Safety practice group in advising and representing clients in a wide-range of inspections, investigations, and enforcement actions before federal OSHA and state OSH agencies.

“We are thrilled to have Beeta join our growing niche practice and look forward to utilizing her government investigation experience to the benefit our employer clients,” said Kara M. Maciel, Chair, Labor & Employment Practice Group.