With the wave of wage and hour litigation showing no signs of receding, employers often have questions about whether they should consider insurance coverage for these claims. In the first of this two-part interview, Hunton & Williams partners Emily Burkhardt Vicente and Walter Andrews discuss what employers need to understand about insurance coverage for state and federal wage and hour claims. View the 5-minute video here.
On January 8, 2018, the United States Supreme Court denied a petition for certiorari seeking to overturn the Fourth Circuit’s new joint employer test under the Fair Labor Standards Act. As a result, employers will continue to be faced with differing joint employer standards in the various federal circuits.
Earlier this month, the U.S. Department of Labor’s Wage and Hour Division issued a Notice of Proposed Rulemaking (“NPRM”) seeking to repeal a 2011 rule that significantly impacted the compensation of hospitality workers. Specifically, the NPRM proposes to allow hospitality employers to control the distribution of the tips they pool assuming their employees are paid the full minimum wage. By way of background, the FLSA requires employers to pay employees a minimum wage (currently $7.25 per hour) plus overtime for all hours worked over 40 in a single workweek. Employees who “customarily and regularly receive tips” must still receive the minimum wage, but employers may elect to take a “tip credit” by counting up to $5.12 per hour of those employees’ tips toward the minimum wage, meaning employers may pay a reduced wage of $2.13 to tipped employees. Historically, employers that take the tip credit have been prohibited from sharing money from a tip-pooling system to employees who do not traditionally receive direct tips (cooks, dish washers, etc.). In 2011, the DOL extended the tip-pooling prohibition to apply to employers even if they do not take the tip credit and pay their employees the full federal minimum wage.
Much has been written about the National Labor Relations Board’s controversial Browning-Ferris decision that significantly expanded the scope of joint employer liability under the National Labor Relations Act. But virtually no attention has been given to the Fourth Circuit Court of Appeals’ recent panel decision in Salinas v. Commercial Interiors, Inc., No. 15-1915 (4th Cir. 2017), which creates an altogether new and incredibly broad joint employment standard under the Fair Labor Standards Act that makes the NLRB’s Browning-Ferris joint employment standard seem temperate at best. Absent a successful appeal to the US Supreme Court or Department of Labor intervention, the Salinas decision could open the floodgates to joint employment FLSA litigation and liability within the Fourth Circuit (Maryland, Virginia, West Virginia, North Carolina and South Carolina) and beyond.
On November 14, 2016, a federal judge in California denied summary judgment to Hanover Insurance Co. (Hanover), finding that class claims alleging a failure to reimburse reasonable business expenses were not excluded by a “wage-and-hour” exclusion contained in EPLI policies issued by Hanover. The lawsuit, brought by a former student of the Bellus Academy beauty school, alleged that Poway Academy (the owner of Bellus) and Beauty Boutique, Inc. (BBI) (operator of two other schools under the “Bellus” name), failed to compensate students for working on paying clients at an onsite salon and also failed to reimburse them for out-of-pocket costs to purchase necessary supplies. The lawsuit alleged a variety of wage-related claims. The lawsuit also alleged that the schools failed to reimburse necessary business expenses in violation of Section 2802 of the California Labor Code.
On Monday, September 19, 2016, the Seattle City Council approved an ordinance (C.B. 118765) designed to bring more stability to the schedules of retail and food service industry workers, who often experience last-minute scheduling changes, loss of paid hours, and back-to-back shifts. The law, which was developed during a series of meetings between the City, business owners and worker advocates, will be codified in Chapter 14.22 of the Seattle Municipal Code and will take effect on July 1, 2017.
Recently, Washington DC council members unanimously voted to increase the city’s minimum wage to $15.00 an hour by the year 2020 for non-tipped hourly workers, many of whom work in the retail industry. The news comes just before Washington DC is scheduled to increase its minimum wage rate from $10.50 an hour to $11.50 an hour on July 1, 2016. The move makes DC the third jurisdiction behind California and New York to increase minimum wages to $15.00 an hour.
When it comes to employee wage equality, California already has one of the most expansive laws in the country, and it is now attempting to go even further. On June 23, the Wage Equality Act of 2016 (“Wage Equality Act”), SB 1063, took one step closer to becoming law as it passed the California State Assembly’s Committee on Labor and Employment. The bill seeks to extend the protections of the California Fair Pay Act, which prohibits pay disparity based on sex for substantially similar work, to also prohibit such disparities based on race or ethnicity. Already approved by the State Senate on May 31, 2016, the Wage Equality Act will now be heard in the Assembly’s Appropriations Committee in August after which, assuming it passes, it will make its way to the Assembly floor. If California’s Wage Equality Act is enacted, it will likely create the strongest wage equality law in the United States.
With its May 26 Lewis v. Epic-Systems Corp. decision, the Seventh Circuit became the first circuit to back the reasoning in D.R. Horton, Inc., 357 NLRB No. 184 (2012), and held that a mandatory arbitration agreement prohibiting employees from bringing class or collective actions against their employer violates the National Labor Relations Act (NLRA). This decision creates a circuit split regarding the enforceability of arbitration agreements with class action waivers in the employment context, and the issue is now ripe for potential Supreme Court review.