Hospitality Labor and Employment Law Blog

Hospitality Labor and Employment Law Blog

Jeffrey H. Ruzal Quoted in “Battles Over Hospitality Wages May Turn on Technicalities” – Law360

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Jeffrey H. Ruzal, Senior Counsel in the Labor and Employment practice, in Epstein Becker Green’s New York office, was quoted by Law360 in “Battles Over Hospitality Wages May Turn on Technicalities.” (Read the full version – subscription required.)

Following is an excerpt:

Law360, New York (October 08, 2014, 3:08 PM ET) – Sideswiped by a pair of minimum wage hikes in New York City and Los Angeles, hotel and restaurant groups are gearing up for legal fights on both coasts. But the groups face uphill battles and any successes will hinge on challenging technicalities in the city processes that approved the hikes . . .

Ruzal added that the New York City living wage order, like Los Angeles’ wage hike, is essentially a test initiative that is expected to precede larger campaigns to raise the minimum wages in these cities on a broader scale.

“This is the tip of the iceberg. It’s very smart legislation, it’s very smart politicking, in my view,” Ruzal said.

Also likely to bolster city officials in any upcoming legal battle is that New York and California’s initiatives are just the latest in a growing string of cities and states that are taking steps to raise wages in particular areas, according to Ruzal.

“I think these small, targeted increases are done by design and not just in New York with the idea of future citywide legislation,” Ruzal said.

Epstein Becker Green’s Wage and Hour App Is Now Available for iOS, Android, and BlackBerry

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Wage & Hour Guide App for Employersby Michael Kun

We’re very pleased to announce that a brand-new version of our free, first-of-its-kind app, the Wage & Hour Guide for Employers, is now available for Apple, Android, and BlackBerry devices. The new app takes advantage of a software-as-a-service programming platform developed by Panvista Mobile.

Our newest version of the app is not only available to users of a variety of devices, but it offers simpler, faster, and more useful ways for employers to locate wage and hour information at the touch of a fingertip.  As new issues are constantly emerging in this area, we’re pleased to provide updated information and critical tools to help employers address wage and hour laws and regulations, such as recent minimum wage increases.

Key features of the updated app include:

  • The Android version is now available for the first time on the Google Play store – also it is also available for BlackBerry devices
  • Updated iPhone and iPad versions are now available on the App Store
  • New summaries of wage and hour laws and regulations are included, including recent minimum wage increases in California, Connecticut, Georgia, Illinois, Maryland, Massachusetts, New Jersey, New York, Texas, Virginia, and the District of Columbia
  • Direct feeds of EBG’s Wage & Hour Defense Blog
  • Easy sharing of content via email and social media
  • Access to EBG’s @ebglaw Twitter feed
  • Rich media library of publications from EBG’s Wage and Hour practice
  • Expanded directory of EBG’s Wage and Hour attorneys

Existing iOS users should visit the App Store to download the new iPhone and iPad versions; the previous edition of the app is retired.

Are Your Managers Still Exempt?

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By Aaron Olsen

Minimum wage continues to be a hot button issue.  For instance, in California, the state minimum wage increased from $8.00 to $9.00 per hour on July 1, 2014. The state minimum wage will further increase to $10 per hour on January 1, 2016.  However, this affects more than just hourly employees.  In California, for employees to be classified as exempt under the “executive” exemption, they must, among other things, be paid at least two times the state minimum wage for full-time employment in a fixed, predetermined salary.  Thus, as of July 1, 2014, the minimum weekly salary is $720 per week (37,440 per year).

With the change in the minimum wage law in California, now is a good time to double check whether any of your employees who are classified as exempt meet all of the requirements.  There has been a lot of attention recently on the “executive” exemption and how it is used in the hospitality industry.  Indeed, as we have reported in the past, President Obama has ordered the Labor Department to revise the regulations concerning who can be classified as an “exempt or professional” employee. 

For California employees who are classified as exempt under the “executive” exemption, it is important also to verify whether the employee:

  •  Manages the enterprise or a customarily recognized department or subdivision thereof;
  • Customarily and regularly directs the work of at least two or more other employees therein;
  • Has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees will be given particular weight;
  • Customarily and regularly exercises discretion and independent judgment; and
  • Spends more than 50% of his/her time engaged in exempt activities.

Watch for common pitfalls.  For instance, if you have a seasonal operation, does the manager “regularly direct the work of at least two or more people” during the off season?  If you divide up the responsibilities such that there are many managers, is each manager truly managing a “customarily recognized department or subdivision.”  Also, how much say do they have in hiring or firing other employees?  For instance, is that decision left to another department?  If you were challenged in a lawsuit, would you be able to show that the employee spends more than 50% of his/her time in exempt activities?

In light of the steep penalties for misclassifying employees, it is important to be sure that anyone classified as exempt meets the requirements.

 

New Laws Affecting California Employers: Anti-Harassment Protections for Unpaid Interns, Anti-Bullying Training for Managers, and Mandatory Paid Sick Leave

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California has created additional protections for unpaid interns and created additional requirements for sexual harassment prevention training.  In addition, California has mandated a new requirement for most employers to provide their employees with paid sick leave.  This new sick-leave requirement will go into effect next summer on July 1, 2015. For a more detailed description of these changes, click here to review the Act Now Advisory written by our colleagues Jennifer L. Nutter and Marisa Ratinoff.

 

Illinois Court Holds That Meal Credit Program Is Valid

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Our colleague Jeffrey H. Ruzal recently wrote an article entitled “Illinois Court Holds That Meal Credit Program Is Valid,” which appears in the September 2014 issue of Hospitality Law.

Following is an excerpt:

Providing an employee meal program may be a nice gesture, but requires companies that do so to maintain proper records in case their meal plans are challenged.  An Illinois appellate court recently affirmed a circuit court’s dismissal of plaintiff restaurant worker’s class action claim that defendant restaurant employer took improper deductions from plaintiff’s wages to fund a meal credit program. 

Read the full article here.

Reprinted with permission from Hospitality Law. Copyright 2014 by LRP Publications. Palm Beach Gardens, FL 33418. All rights reserved. For details on this or other related products, visit www.shoplrp.com/hospitality.html or call toll free 1-800-341-7874

7-Eleven Franchise Operators’ Overtime & Minimum Wage Lawsuit Given Green Light by NJ District Court

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On Epstein Becker Green’s Management Memo blog, Maxine Neuhauser reviews New Jersey U.S. District Court’s ruling in Naik v. 7-Eleven that four franchise owner-operators may pursue overtime and minimum wage claims against franchisor 7-Eleven under both the federal Fair Labor Standards Act (“FLSA”) and the New Jersey Wage and Hour Law (“NJWHL”).

Following is an excerpt from the blog post:

On July 29, 2014 the NLRB’s General Counsel announced a decision to treat McDonald’s, USA, LLC as a joint employer, along with its franchisees, of workers  43 McDonald’s franchised restaurants with regard to unfair labor practices charges filed by unions on behalf of the  workers and authorized charges against of both the franchisees and McDonalds. (See our July 30 blog post  and Aug. 14 blog post)

To access the full blog post, please click here.

As Marijuana Becomes Legal in More States, How Should Employers Handle Positive Drug Tests?

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By:  Jordan Schwartz

Due to the ever changing laws surrounding the legality of marijuana, many of our hospitality clients have recently asked us whether it is lawful to terminate an employee who has tested positive for marijuana.  The answer varies greatly depending on the state in which you are located.  

States continue to pass legislation legalizing marijuana use for specific purposes.  On July 5, 2014, New York became the twenty-first state along with the District of Columbia to legalize marijuana use for certain medical conditions—joining Alaska, Arizona, California, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, and Vermont.  Two other states, Colorado and Washington, have legalized recreational marijuana use for individuals who are 21 years old or older, and Alaska and Oregon currently have similar legislation pending.

Most state laws legalizing marijuana do not address the employment issues implicated by these statutes.   Courts in several of these states have held that the protection afforded under these statutes is limited to the decriminalization of marijuana.  Therefore, courts have generally upheld employers’ right to discipline employees, including terminating their employment, when the employees’ marijuana use violates drug-free workplace policies.  However, some states, such as Arizona, Delaware, and Connecticut, prohibit employers from terminating an individual’s employment or failing to hire an applicant solely based on a positive drug test result.  Consequently, employers in those states should proceed cautiously when deciding whether to discipline an employee or fail to hire an applicant based on marijuana use.

Employers taking action against employees who have tested positive for marijuana can also run into issues with other state statutes, such as those prohibiting employers from taking adverse actions for lawful off-duty activities.  For example, Colorado prohibits an employer from firing an employee for lawful off-duty conduct.  Thus, even if an employee tests positive for marijuana, he can claim he is protected from termination, so long as his use of the drug occurred during non-working hours.  At this point, it is not clear whether such an argument will be successful.  So far, there has only been one Colorado case, Coats v. Dish Network, L.L.C., addressing this novel legal question, and the Colorado Court of Appeals affirmed the employer’s right to fire an employee for off-duty medical marijuana use.  However, the Colorado Supreme Court granted review of the case recently, so Colorado employers should monitor this case closely.  Therefore, employers in Colorado and other states that prohibit discipline for lawful off-duty activities should be careful when penalizing their employees for off-duty marijuana use.

Hospitality employers also need to be aware of potential violations of the Americans with Disabilities Act (ADA) associated with medical marijuana.  Employers with facilities in states that allow medical marijuana use may need to provide a reasonable accommodation under the ADA for employees with a valid doctor’s authorization.  For instance, the New York statute permitting medical marijuana use automatically classifies every individual who is considered a Certified Patient as disabled.  Therefore, New York employers must engage in an interactive process with the employee to determine whether they need to provide the employee with a reasonable accommodation.  Employers in other states may have similar obligations.

Employers should continue to carefully monitor legislation in their states as the laws continue to evolve.  To ensure legal compliance, employers should rewrite their workplace policies to include marijuana in their drug testing policy and state the potential consequences of an employee’s marijuana use.  Finally, in deciding whether to terminate an employee for marijuana use, an employer may want to focus on the employee’s impairment on the job and approach the situation in the same way as it handles an employee’s impairment from alcohol or prescription drugs.

BIG MAC ATTACK : NLRB General Counsel Argues Franchisees and McDonald’s Are Joint Employers

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With the  continued strength of franchising in the hospitality sector and the ever growing reliance on vendors and subcontractors to perform many functions in distribution, maintenance, asset protection and other functions  that hospitality employers historically  performed with their own employees, creating different levels of integration and affiliation between hospitality entities among providers and their various service providers and contractors, the issue of joint-employer status has become a prominent issue of concern. As the NLRB moves towards a broader definition of joint employer status, the  NLRB’s General Counsel’s position in a series of cases involving McDonald’s and numerous franchisees across the country appears to foreshadow the NLRB’s new, more aggressive position on what factors establish the joint employer relationship.

On Epstein Becker Green’s Management Memo blog, Steven M. Swirsky discusses this issue and the following is an excerpt from the blog post:

NLRB General Counsel Richard Griffin announced on Tuesday July 29th that he has authorized issuance of Unfair Labor Practice Complaints based on 43 of 181 charges pending against McDonald’s, USA, LLC and various of its franchisees, in which the Board will allege that the company and its franchisees are joint-employers. If the General Counsel prevails on his theory that McDonalds is a joint employer with its franchisees, the result would be not only a finding of shared responsibility for unfair labor practices, but could also mean that the franchisor would share in the responsibilities of collective bargaining if unions are successful in organizing franchisors’ workers.

To access the full blog post, please click here.

Coverall Case Pending in the First Circuit Could Have Major Impact on The Future of the Franchise Industry in Massachusetts

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By:  Barry Guryan and Jeff Ruzal

In a highly publicized March 23, 2010 decision, Awuah v. Coverall N. Am., Inc., 707 F.Supp.2d 80 (D. Mass. 2010), U.S. District Judge William Young for the District of Massachusetts rocked the Massachusetts business community by ruling that a group of janitorial franchisees were improperly classified as independent contractors, and that they were instead “employees” of commercial cleaning franchisor Coverall who are entitled to statutory protection under Massachusetts’ Wage laws including, among others, minimum wage, overtime pay, meal breaks and workers’ compensation.

Massachusetts law is known to have one of the most stringent employment classification tests in the country. Commonly referred to as the “ABC Test,” G.L. c. 149, § 148B(a), putative employers must satisfy the following three conditions to establish an independent relationship with individuals who perform services for them: (a) the individual is free from control and direction in connection with the performance of service; (b) the service is performed “outside the usual course of the business of the employer,” and (c) the individual is customarily engaged in an independently established business of the same nature as that involved in the service performed.  Id.  Prong B is by far the most challenging part of the Test because, in most instances, the services to be performed fall within the employer’s usual course of business.  This requirement does not exist under most state law classification tests.     

Seizing on prong B of the Test, Judge Young rejected Coverall’s argument that its franchising business is separate and distinct from the franchisee’s individual businesses in commercial cleaning.  Judge Young instead found that:

franchising is not itself a business[;] rather a company is in the business of selling goods or services and uses the franchise model as a means of distributing the goods or services to the final end user without acquiring significant distribution costs.  Describing franchising as a business in itself, as Coverall seeks to do, sounds vaguely like a description for a modified Ponzi scheme—a company that does not earn money from the sale of goods and services, but from taking in more money from unwitting franchisees to make payments to previous franchisees.

Awuah, 707 F.Supp.2d at 84 (emphasis added).  Concluding that Coverall franchisees did not perform services outside the course of Coverall’s business, the Court held that the franchisees were not independent contractors but Coverall’s employees.  Coverall thereafter filed its notice of appeal of this decision to the First Circuit Court of Appeals.   

On February 3, 2014, Coverall filed its brief to the First Circuit, arguing, among other points, that its regular activities and the services it performs are entirely different from the activities and services performed by franchise owners.  As Coverall explained, its regular activities are selling franchises, promoting the Coverall® brand, soliciting customer contracts, and providing billing and collections services to franchise owners.  By contrast, Coverall argued, franchise owners independently operate commercial cleaning businesses, which include scheduling cleaning services, staffing cleaners, purchasing cleaning equipment and supplies, and supervising their own employees. 

Echoing Coverall’s argument, the International Franchise Association (“IFA”), the largest trade association in the world, argued as amicus curiae in its April 17, 2014 brief to the First Circuit that the District Court failed to recognize the significant differences between Coverall’s and the franchise owners’ regular activities and services, and instead incorrectly focused on the irrelevant fact that they both ultimately depend on the sale of commercial cleaning services. 

The IFA further argued that Judge Young’s decision will severely damage the Massachusetts franchising business, referencing staggering statistics that highlight the importance franchising has on Massachusetts’ economy.  According to the Economic Impact of Franchised Businesses, in 2007, the most recent year for which comprehensive data is available, 13,676 Massachusetts franchise establishments produced 149,600 Massachusetts jobs totaling $6.4 billion in payroll.  www.buildingopportunity.com/download/Part1.pdf.  What is more, those 13,676 Massachusetts franchise establishments helped create 323,900 additional independent Massachusetts jobs supporting, but not directly tied to, the franchised businesses.  The IFA argued that Judge Young’s decision puts Massachusetts’ robust franchising business in jeopardy by, among other things, disincentivizing franchisees from supplying their own financial capital into new and existing franchises because as salaried or hourly “employees” they will not be entitled under the law to the profits they produce.  

Whether the First Circuit will agree with the IFA and thus look to narrow Judge Young’s expansive reading of prong B is an open question.  In any event, franchisors operating in Massachusetts must be mindful of the stringent ABC Test, and should consult with an attorney on compliance and best practices in the franchising business.  Franchisors outside of Massachusetts must likewise be aware of the classification laws unique to the states in which they operate to ensure utmost compliance.                  

OSHA and NLRB Agreement Opens New Door To Whistleblower Claims

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On Epstein Becker Green’s OSHA Law Update blog, Eric Conn reviews the agreement between the NLRB and OSHA, which allows employees to file out-of-date safety related whistleblower claims to be filed with the NLRB.

Following is an excerpt from the blog post:

On May 21, 2014, the National Labor Relations Board (NLRB) published a memorandum discussing a new agreement between NLRB and OSHA regarding a backdoor route for employees to file safety related whistleblower claims that are too stale to be filed with OSHA. The NLRB memo directs OSHA representatives to “notify all complainants who file an untimely [OSHA] whistleblower charge of their right to file a charge with the NLRB.” As a result of this agreement, employers should expect an increase in the number of unfair labor practice claims filed by employees alleging retaliation for protected safety related whistleblower activity.

To access the full blog post, please click here.

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