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DOL lifts its 80-20 rule for tipped employees

The Fair Labor Standards Act sets a minimum wage, but it allows employers to take a credit, i.e., pay below the minimum wage, for tipped employees.

To prevent abuse of the tip credit, the DOL under President Obama announced its 80-20 rule, which provided that the tip credit was not available, i.e., the tipped employee must be paid the full minimum wage, if 20% or more of their time is spent performing non-tippped work.

Now, instead of placing a time limit on non-tipped work, the DOL will permit a tip credit if non-tipped work is “performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.”

Source: DOL opinion letter no. FLSA2018-27 (11/8/18).

FLSA’s anti-retaliation provisions permit lawsuits against persons, including entities, even if not enterprises within interstate commerce

The Tenth Circuit held that, unlike its other provisions, FLSA’s anti-retaliation provision applies to persons whether or not they are engaged in interstate commerce. In the case, two workers became convinced that their employer owed them overtime under federal law (FLSA, the Fair Labor Standards Act). They complained to the DOL, were fired and the DOL sued the company alleging that the discharges were retaliation for cooperating with the DOL’s investigation.

FLSA’s overtime (and other provisions) apply only to employers who are engaged in interstate commerce. Here the company argued it had established it was not. The Tenth Circuit held that, whether it was or wasn’t was irrelevant in a retaliation claim. The court held that, as written, FLSA’s anti-retaliation provisions do not require proof that the defendant is engaged in interstate commerce. The court held, therefore, the company could be sued for retaliation, whether or not it was engaged in interstate commerce.

Source: Acosta v. Foreclosure Connection, Inc., case no. 17-4111 (10th Cir. 2018).

Supreme Court ruled driver wasn’t required to arbitrate

The Supreme Court held that a driver for a trucking company need not arbitrate wage and related claims, even though the driver is technically an independent contractor, not an employee. In reaching its holding, the Supreme Court, first, decided that such driving falls within the Federal Arbitration Act’s exclusion for transportation workers, meaning, the Court held, the FAA does not apply. The FAA is of course the federal law that permits the arbitration of federal lawsuits. Next, the Supreme Court held that the FAA’s exclusion applies not only to employees but independent contractors.

Applicability of the decision is expected to be argued in a number of pending cases, including lawsuits brought by independent contractors who drive for social media based delivery services.

Source: New Prime, Inc. v. Oliveira, case no. 17-340 (1/15/19).

Tenth Circuit holds that FLSA’ anti-retaliation provision reaches farther than its other clauses

The Fair Labor Standards Act (FLSA) is the nation’s leading wage-hour law. Most notably it includes requirements such as minimum wage, overtime and child labor laws. Those provisions apply onto to an “enterprise” that is engaged in interstate commerce. It also prohibits retaliation against workers who exercise FLSA rights. In a recent case, the Tenth Circuit held that the anti-retaliation provisions apply more broadly than the rest of FLSA.

As the Court explained the bulk of FLSA applies only to “‘an enterprise engaged in commerce.’ 29 U.S.C. § 207(a)(1). ”Commerce’ means trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof.’ § 203(b).”

However, the anti-retaliation provision of FLSA does not refer to an enterprise engaged in commerce. It states that “it shall be unlawful for any person . . . to discharge or in any other manner discriminate against any employee because such
employee has filed any complaint . . . related to [FLSA].” § 215(a)(3) (emphasis added). A person is defined as “an individual, partnership, association, corporation, business trust, legal representative, or any organized group of persons.” § 203(a).

Accordingly, the Tenth Circuit held that the anti-retaliation provision in FLSA reaches farther than its other protections to apply to any “person,” not just an “enterprise,” that engages in retaliatory conduct.

Source: Acosta v. Foreclosure Connection, Inc., — F.3d —, case no. 2:15-CV-00653-DAK (10th Cir. 8/15/18).

Supreme Court’s new expansive reading of FLSA is applied for first time by a Circuit Court

The Supreme Court held earlier this year in Encino Motorcars, LLC v. Navarro that the Fair Labor Standards Act (FLSA) should no longer be construed narrowly in favor of employees but should, instead, be given a “fair” reading based on its own language. The Supreme Court’s ruling has just seen its first application in a Circuit Court case, entitled Mosquera v. MTI Retreading Co., decided by the Sixth Circuit.

In Mosquera, the employee held an engineering degree but argued he spent less than 50% of his time doing work that required an engineering degree and should, therefore, not have been classified as a professional employee exempt from overtime. The Sixth Circuit disagreed. The Sixth Circuit noted the evidence that had been submitted in support of the employer’s summary judgment motion and dismissed the plaintiff’s own affidavit to the contrary, saying it was “unsubstantiated” and “self-serving.” The Sixth Circuit noted that, prior to Encino Motorcars, it would have looked on the plaintiff’s claim more favorably, interpreting the professional exemption “narrowly,” but under the Supreme Court’s new ruling, it was required to give the law a broader “fair” reading instead. Under the new approach to FLSA, the Sixth Circuit held the employer’s motion for summary judgment was “compelling” and as such, it held, the employee was properly characterized as a professional who was exempt from overtime.

Mosquera is no doubt the first in a long line of cases to come that will take a less “narrow” approach to interpreting FLSA.

Source:  Mosquera v. MTI Retreading Co. (6th Cir. 8/14/18).

“Spiritual coercion,” “volunteers” and children under federal wage laws

Two recent decisions by the U.S. Circuit Court of Appeals address the applicability of federal labor laws to church volunteers. The Fair Labor Standards Act (FLSA) is the nation’s leading wage-hour law. FLSA requires a minimum wage, overtime pay and prohibits child labor. FLSA applies only to “employees.” Volunteers are generally not considered to be “employees;” therefore, FLSA generally does not apply to volunteers. These two recent cases addressed these concepts in the context of church volunteers.

One case was decided by the Sixth Circuit, Acosta v. Cathedral Buffet, Inc. It involved a restaurant, operated by a church, on the church’s campus, that was open to the public and staffed in part by church volunteers.

The other case was decided by the Tenth Circuit, Acosta v. Paragon Contractors Corp. It involved a pecan ranch, at which church members, including children, harvested pecans.

In both cases, the Courts held the businesses were commercial enterprises subject to FLSA, and that the church members were doing work. Thus both courts were called to decide if the church members were truly volunteering their time, such that FLSA did not apply to their work. Both courts looked to a 1985 Supreme Court decision, Alamo Foundation, where the Supreme Court held that a volunteer is, among other things, someone who works “without promise or expectation of compensation” and “for his own personal purpose or pleasure.” And, there, the Courts split. The Sixth Circuit held that the church members were volunteers, and the Tenth Circuit held they were not.

Why did the Courts split? The Sixth Circuit decided its case after the Tenth Circuit, and it held that the difference was because (a) the Tenth Circuit case involved children and (b) the Tenth Circuit case involved more than “spiritual coercion.”

Under Alamo Foundation, a worker cannot be held a “volunteer” if his work is coerced. A person who is coerced into working is not working purely “for his own personal purpose or pleasure.” The Sixth Circuit held that, in the Cathedral Buffet case, the workers, who were adults, were working because they felt it was expected of them to be “faithful stewards of God’s grace in its various forms.” The Sixth Circuit held that, even if such religious dogma was considered to be coercive, it is “spiritual coercion,” and as such insufficient to transform a volunteer into an “employee” under FLSA. However, the Court held that in the Tenth Circuit’s case, the workers were children and, further, in its own case, the Tenth Circuit highlighted facts suggesting more than mere spiritual coercion. For example, the Tenth Circuit pointed to evidence, including “one child (who) stated that if she had not worked, she would have lost her family and been kicked out of the community.”

Non-profits that benefit from the work of volunteers, especially church-related non-profits, should carefully review these two new cases.

Source: Acosta v. Cathedral Buffet, Inc.case no. 17–3427 (6th Cir. 4/16/18); Acosta v. Paragon Contractors Corp., case no. 17-4025 (10th Cir. 5/13/18).