Our colleagues   at Epstein Becker Green have a resent post on the Wage and Hour Defense Blog that will be of interest to our readers in the retail industry: “California Supreme Court’s Clarification of De Minimis Doctrine Leaves Many Questions Unanswered – and Does Little to Ease Plaintiffs’ Path to Class Certification.”

On July 26, 2018, the California Supreme Court issued its long-awaited opinion in Troester v. Starbucks Corporation, ostensibly clarifying the application of the widely adopted de minimis doctrine to California’s wage-hour laws. But while the Court rejected the application of the de minimis rule under the facts presented to it, the Court did not reject the doctrine outright. Instead, it left many questions unanswered.

And even while it rejected the application of the rule under the facts presented, it did not address a much larger question – whether the highly individualized issues regarding small increments of time allegedly worked “off the clock” could justify certification of a class on those claims. …

Read the full post here.

A legislative bargain requires give-and-take from all stakeholders. On June 28, 2018, Massachusetts Governor Baker signed House Bill 4640, “An Act Relative to Minimum Wage, Paid Family Medical Leave, and the Sales Tax Holiday” (the “Act”). This “grand bargain” gradually raises the minimum wage, provides for paid family and medical leave, makes permanent the Commonwealth’s annual tax holiday, and phases out Sunday and holiday premium pay requirements. While Massachusetts employers must now adjust to an increased minimum wage and new paid family medical leave program, retailers with eight or more employees may see those costs mitigated by the gradual elimination of Sunday and holiday premium pay mandates.

Currently, Massachusetts retailers must provide premium pay of 1.5 times the regular hourly rate to non-exempt employees who work on Sundays or certain holidays designated by state law. The holidays covered by the premium pay laws are New Year’s Day, Memorial Day, Independence Day, Labor Day, Columbus Day, and Veterans Day. The premium pay requirements do not apply to employees who are exempt from overtime pay mandates under Massachusetts law, specifically executive, administrative, and professional employees who earn more than $200 per week.

The Act will reduce, and ultimately remove, Massachusetts’ Blue Law premium pay requirement in accordance with the following schedule:

Effective Date Premium Pay Rate
January 1, 2019 One and four-tenths (1.4)
January 1, 2020 One and three-tenths (1.3)
January 1, 2021 One and two-tenths (1.2)
January 1, 2022 One and one-tenth (1.1)
January 1, 2023 No premium pay

Though covered employers will no longer be required to offer premium pay for Sunday and holiday work, the other provisions in the Blue Law remain unchanged. As such, retail employers may not require employees to work on Sundays or holidays, nor may employers discriminate or take adverse action against employees who refuse to work such shifts.

The phase out of premium pay is intended to provide relief for retailers; however, it also appears to create a subtle complication that may raise costs for Massachusetts retailers over the next four years. Under federal and state law, employers must pay non-exempt employees one-and-one-half premium pay for all hours worked over 40 in a week. Premium pay for work on Sundays and holidays may be creditable toward overtime compensation, but only if it is at least one-and-a-half times that employee’s “regular rate” of pay for the given workweek.

The “grand bargain” legislation thus reduces premium pay below this one-and-one-half-times threshold, such that it is no longer excluded from the overtime pay calculation, and therefore, the Massachusetts premium pay can no longer be used to satisfy the federal and state overtime pay requirements. As such, if an employee works more than 40 hours in the workweek, and some of those hours fall on a Sunday or qualified holiday, Massachusetts retailers may be required to provide the employee with both (1) the Sunday or holiday premium, and (2) overtime (above and beyond the premium pay already provided). To further complicate matters, the premium pay received for time worked on the Sunday or holiday will need to be incorporated into the employee’s regular rate of pay, which will affect the calculation of the employee’s overtime rate of pay. Note also that employees’ entitlement to decline Sunday/holiday work (and not be retaliated against) stays in effect as part of the grand bargain. It remains to be seen whether this fact, when considered along with the elimination of premium pay, will impact the number of employees willing to work on Sundays/holidays.

While state lawmakers may choose to revise the statute as it pertains to this complication, overall, the elimination of premium pay should still come as a welcome relief to many Massachusetts retailers, especially those directly competing with stores across the border in New Hampshire. Given that the first reduction in pay is set to take effect in a matter of months, covered employers should notify their employees about the reduction, ensure overtime calculations comply with federal and state laws, and confirm payroll systems are updated to reflect these changes.

This post was written with assistance from Eric I. Emanuelson, Jr., a 2018 Summer Associate at Epstein Becker Green.

Our colleague at Epstein Becker Green has a post on the Wage and Hour Defense blog that will be of interest to our readers in the retail industry: “Federal Court Concludes That 7-Eleven Franchisees Are Not Employees of 7-Eleven.

Following is an excerpt:

In November 2017, four convenience store franchisees brought suit in federal court against 7-Eleven, Inc., alleging that they and all other franchisees were employees of 7-Eleven. The case was filed in the United States District Court for the Central District of California, entitled Haitayan, et al. v. 7-Eleven, Inc., case no. CV 17-7454-JFW (JPRx).

In alleging that they were 7-Eleven’s employees, the franchisees brought claims for violation of the federal Fair Labor Standards Act (“FLSA”) and the California Labor Code, alleging overtime and expense reimbursement violations. The trial court granted judgment in 7-Eleven’s favor, concluding that 7-Eleven was not the four franchisees’ employer under California law or federal law. …

Read the full post here.

Featured on Employment Law This Week:  The Ninth Circuit held that certain auto service advisors were not exempt because their position is not specifically listed in the FLSA auto dealership exemption.

The 9th relied on the principle that such exemptions should be interpreted narrowly. In a 5-4 decision last week, the Supreme Court found no “textual indication” in the FLSA for narrow construction. Applying a “fair interpretation” standard instead, the Court ruled that the exemption applies to service advisors because of the nature of the work.

Watch the segment below and read our recent post.

As 2017 comes to a close, recent headlines have underscored the importance of compliance and training. In this Take 5, we review major workforce management issues in 2017, and their impact, and offer critical actions that employers should consider to minimize exposure:

  1. Addressing Workplace Sexual Harassment in the Wake of #MeToo
  2. A Busy 2017 Sets the Stage for Further Wage-Hour Developments
  3. Your “Top Ten” Cybersecurity Vulnerabilities
  4. 2017: The Year of the Comprehensive Paid Leave Laws
  5. Efforts Continue to Strengthen Equal Pay Laws in 2017

Read the full Take 5 online or download the PDF.

The New York City Department of Consumer Affairs (“DCA”) has issued proposed rules  for the implementation of the Fair Workweek Law. The law establishes scheduling practices for fast food and retail workers in New York City and is set to go into effect on November 26, 2017.

With regard to retail employers, the proposed rules include:

  • Workplace notice positing requirements, § 14-02.   The DCA’s notice template is not yet available.
  • Workplace schedule posting requirements, § 14-04.   Retail employers must conspicuously post schedules three days before work begins.   The proposed rule expressly provides that employers may not post or otherwise disclose to other employees the work schedule of an employee who has been granted an accommodation based on the employee’s status as a survivor of domestic violence, stalking, or sexual assault, where disclosure would conflict with the accommodation.
  • Recordkeeping requirements to document compliance, § 14-08(a).   The proposed rule states these records must be maintained “in an electronically accessible format” and show:
    • Actual hours worked by each employee each week;
    • An employee’s written consent to any schedule changes, where required; and
    • Each written schedule provided to an employee.
  • Employee work schedule request requirements, § 14-08(b) and (c).   Within two weeks’ of an employee’s request, retail employers must provide employees with their work schedules for any previous week worked for the past three years. Within one week of an employee’s request, retail employers must provide the most current version of the complete work schedule for all employees who work at the same location, with the exception of those employees with accommodations based on the employee’s status as a survivor of domestic violence, stalking, or sexual assault.
  • Procedural guidance for employees who wish to proceed with a private right action against their employers for violations of the law.

A public hearing on the proposed rules is scheduled for Friday November 17, 2017. The deadline for written comments is 5:00 p.m. on November 17, 2017.

In a potentially significant decision following the New Jersey Supreme Court’s ruling in Hargrove v. Sleepy’s, LLC, 220 N.J. 289 (2015), a New Jersey appellate panel held, in Garden State Fireworks, Inc. v. New Jersey Department of Labor and Workforce Development (“Sleepy’s”), Docket No. A-1581-15T2, 2017 N.J. Super. Unpub. LEXIS 2468 (App. Div. Sept. 29, 2017), that part C of the “ABC” test does not require an individual to operate an independent business engaged in the same services as that provided to the putative employer to be considered an independent contractor.  Rather, the key inquiry for part C of the “ABC” test is whether the worker will “join the ranks of the unemployed” when the business relationship ends.

In Garden State Fireworks, the panel analyzed whether pyrotechnicians hired by a fireworks company to conduct fireworks displays were properly classified as independent contractors rather than employees under New Jersey’s Unemployment Compensation Law (UCL).  The panel’s analysis was guided by the “ABC” test, which presumes that a worker is an employee, unless the employer can demonstrate three factors.  As stated in Sleepy’s, these factors are drawn from N.J.S.A. 43:21-19(i)(6), which asks whether:

(A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and

(B) Such service is either outside the usual course of business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and

(C) Such individual is customarily engaged in an independently established trade, occupation, profession or business.

During a routine audit by the New Jersey Department of Labor and Workforce Development (the “Department”), the fireworks company was found to have misclassified certain pyrotechnicians as independent contractors. The company appealed the Department’s order, and it was reversed by an Administrative Law Judge (ALJ).  In a final administrative action, however, the Commissioner of the Department rejected the ALJ’s findings and agreed with the auditor’s initial assessment.  The company appealed from the Commissioner’s decision.  After reviewing the hearing record from the ALJ, the panel reversed the Commissioner’s decision and concluded that all of the factors of the “ABC” test had been satisfied.

As to part A, the panel found that there was no evidence to support the conclusion that the company controlled the technicians’ performances. On the contrary, the facts suggested that the technicians were given “virtually complete control” over the fireworks displays.  As to part B, the panel stated that the fireworks displays were performed offsite and outside of all of the company’s places of business. The panel concluded that part C was satisfied because the hearing testimony revealed that the technicians only performed shows during one or two weeks in a year, and none of the technicians relied on the shows as their primary source of income.  The technicians were either retirees or full-time employees in other endeavors when not performing fireworks displays, and were not employed independently to provide the same service.

In applying the “ABC” test, the panel rejected the Commissioner’s interpretation of part C to require an “independently established enterprise or business,” even though this interpretation appears to be consistent with other unpublished appellate division decisions applying the “ABC” test in different factual contexts post-Sleepy’s.  For example, in N.E.I. Jewelmasters of New Jersey, Inc. v. Board of Review, Docket No. A-2333-14T3, 2016 N.J. Super. Unpub. LEXIS 1456 (App. Div. June 24, 2016), a panel held that “[s]atisfaction of [part] C requires a clear showing that a viable independent business exists apart from the particular contractual relationship at issue.”  The panel found that part C was not satisfied in that case because: the sales/marketing employee lacked “an independently established business”; she worked solely for one employer; and “her termination rendered her unemployed.”  Moreover, in ABS Group Services v. Board of Review, Docket No. A-1847-12T3, 2016 N.J. Super. Unpub. LEXIS 989 (App. Div. Apr. 27, 2016), a panel required evidence that the employee, a certified boiler and pressure vessel inspector, was engaged in an independent business to satisfy part C.  Because the employee was dependent upon the employer for his livelihood and did not have a business of his own, the panel concluded that part C was not satisfied.

In Garden State Fireworks, the panel construed “independent business” in part C to include separate employment that continues despite the termination of the challenged relationship.  In so finding, the panel relied on Philadelphia Newspapers, Inc. v. Board of Review, 397 N.J. Super. 309, 323 (App. Div. 2007), for the assertion that part C is satisfied “when a person has a business, trade, occupation, or profession that will clearly continue despite termination of the challenged relationship.” Philadelphia Newspapers, in turn, relies on Carpet Remnant Warehouse, Inc. v. New Jersey Department of Labor, 125 N.J. 567 (1991). Carpet Remnant cites to Trauma Nurses, Inc. v. Board of Review, 242 N.J. Super. 135, 148 (App. Div. 1990), noting parenthetically that nurses are engaged in an independently established profession that can satisfy part C where it can be shown that they work for brokers and/or hospitals performing varying types of work, such as part-time, full-time, and shift work.

Sleepy’s recites a similar interpretation of part C, although Sleepy’s is not cited in Garden State Fireworks.  The court in Sleepy’s indicated that part C “calls for an enterprise that exists and can continue to exist independently of and apart from the particular service relationship,” quoting Gilchrist v. Division of Employment Security, 48 N.J. Super. 147 (App. Div. 1957).  Notably, the Sleepy’s court recited language from case law that uses the broader term “enterprise” instead of “independently established business,” which is a phrase that implies that the worker in question must be a business owner.  Further, like Garden State Fireworks, Sleepy’s notes that part C requires “a profession that will plainly persist despite the termination of the challenged relationship,” citing to Trauma Nurses.  Moreover, the Sleepy’s court stated that if the individual joins “the ranks of the unemployed,” part C is not satisfied.  Thus, the panel’s interpretation of part C’s “independent-business test” in Garden State Fireworks appears to be consistent with court’s interpretation of part C in Sleepy’s.

In addition, the panel did not interpret part C to require that the independently established profession be of the same nature as the service provided to the putative employer. This requirement exists in the “ABC” test of some states, such as Connecticut, Delaware, and Massachusetts, although no such requirement has been found under New Jersey law pursuant to N.J.S.A. 43:21-19(i)(6)(C) or case law.  While Trauma Nurses is an example of a case where an appellate panel found that part C was satisfied where the putative employees were able to provide the same service in the same industry following the conclusion of the relationship with the putative employer, the panel in Trauma Nurses did not hold that providing the same service in the same industry is a necessary component of part C.  The panel in Garden State Fireworks also did not find service in the same industry to be necessary to satisfy part C, implicitly stating that an employee who only works for a company one to three times a year while working full time elsewhere is not an employee of that company under part C even if the full-time employment is in a different industry.  Likewise, the ALJ discerned that part C does not require that the “independently established trade, occupation, profession or business . . . be part of the same industry.”

Another noteworthy observation from Garden State Fireworks is that the panel found, without directly addressing the issue, that pyrotechnicians who were retirees could satisfy part C.  Plainly, a retiree, by definition, is not engaged in an “an independently established trade, occupation, profession or business.”  Nevertheless, if the panel would have addressed the issue, it may have concluded, based on Carpet Remnant, that the retirees were not employees because, being retired from employment, they were not economically dependent on the fireworks company and, thus, would not join the ranks of the unemployed upon termination of the challenged relationship.

In sum, the panel’s analysis highlights that the application of the “ABC” test is a fact-sensitive inquiry. Employers who fail the “ABC” test of the UCL may be liable for unemployment compensation and disability benefits.  Significantly, the “ABC” test, as held in Sleepy’s, is also used to determine independent contractor status under New Jersey Wage and Hour Law and New Jersey Wage Payment Law.  Thus, an employer’s failure to satisfy the “ABC” test with respect to its independent contractors can further result in liability for unpaid wages, overtime, and employee benefits.  A principal who engages the services of an independent contractor should periodically review such engagement to ensure compliance with New Jersey law.

For the second time in as many years, California Governor Jerry Brown has vetoed “wage shaming” legislation that would have required employers with 500 or more employees to report gender-related pay gap statistics to the California Secretary of State on an annual basis beginning in 2019 for publication on a public website. Assembly Bill 1209 (“AB 1209”), which we discussed at length in last month’s Act Now advisory, passed the Legislature despite widespread criticism from employers and commerce groups.  This criticism included concerns that publication of statistical differences in the mean and median salaries of male and female employees without accounting for legitimate factors such as seniority, education, experience, and productivity could give a misleading impression that an employer had violated the law.  Opponents also decried the burden the bill would place on employers to do data collection and warned that it would lead to additional litigation.  In vetoing the measure, Governor Brown noted the “ambiguous wording” of the bill and stated he was “worried that this ambiguity could be exploited to encourage more litigation than pay equity.”

However, the same pen that vetoed AB 1209 signed another pay-equity law last week: Assembly Bill 168 (“AB 168”).  AB 168 precludes California employers from asking prospective employees about their salary history information.  “Salary history information” includes both compensation and benefits.  Like similar laws passed recently in several other states and cities, the policy underlying the inquiry ban is that reliance upon prior compensation perpetuates historic pay differentials.  Opponents have argued that such a ban will make it more difficult for employers to match job offers to market rates.  Go to our Act Now Advisory on AB 168 for a comprehensive review of this new law.

Our colleague at Epstein Becker Green, has a post on the Wage and Hour Defense Blog that will be of interest to many of our readers in the retail industry: “Tenth Circuit Rules Tips Belong to the Employer If Tip Credit Is Not Taken.”

Following is an excerpt:

When an employer pays the minimum wage (or more) instead of taking the tip credit, who owns any tips – the employer or the employee? In Marlow v. The New Food Guy, Inc., No. 16-1134 (10th Cir. June 30, 2017), the United States Court of Appeals for the Tenth Circuit held they belong to the employer, who presumably can then either keep them or distribute them in whole or part to employees as it sees fit. This directly conflicts with the Ninth Circuit’s decision last year in Oregon Restaurant and Lodging Ass’n v. Perez, 816 F.3d 1080, 1086-89 (9th Cir. 2016), pet for cert. filed, No. 16-920 (Jan. 19, 2017) and likely sets up a showdown this fall in the U.S. Supreme Court. …

Read the full post here.

Featured on Employment Law This Week – New York City has enacted “fair workweek” legislation.

Mayor Bill de Blasio has signed a package of bills into law limiting scheduling flexibility for fast-food and retail employers. New York City is the third major city in the United States, after San Francisco and Seattle, to enact this kind of legislation. The bills require fast-food employers to provide new hires with good-faith estimates of the number of hours that they will work per week and to pay workers a premium for scheduling changes made less than 14 days in advance.

Watch the segment below, featuring our colleague Jeffrey Landes from Epstein Becker Green. Also see our colleague John O’Connor’s recent post, “New York City Tells Fast Food Employees: ‘You Deserve a Break Today’ by Enacting New Fair Workweek Laws,” on the Hospitality Labor and Employment Law blog.