Hospitality Labor and Employment Law Blog

Hospitality Labor and Employment Law Blog

Loose Lips Sink Ships: New Liabilities Under The Affordable Care Act

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The Affordable Care Act (“ACA”) requires larger employers (50 or more full time equivalents) to offer “affordable” “minimum value” health care to employees working Affdorable Care Actthirty (30) or more hours per week or face the possibility of significant penalties in some cases.  Thus the cost of staffing with part time employees may be far less than paying for health insurance for workers working 30 or more hours.

At the same time, ERISA Section 510 (29 USC Section 1140) prohibits discrimination against an employee “for exercising any rights to which he is entitled under the provisions of any employee benefit plan…or for the purpose of interfering with the attainment of any right  to which such participant may become entitled under the plan…”

In a June 15, 2015 article published in Pension & Benefits Daily, we indicated that Marin v. Dave & Buster’s, Inc. et. al.  (S.D.N.Y.) will likely be the first of what may be many such cases under the ACA.   In this case, an employee who had been full time and working over thirty hours per week  had her hours reduced to below thirty the effect of which was that she would not qualify for health insurance. As a result, she brought a putative class action lawsuit alleging a violation of ERISA Section 510.  On February 9, 2010 Judge Hellerstein denied the Employer’s motion to dismiss, holding that allegations of intent to deprive plaintiff of health insurance would go to trial. Also of significance was his ruling that ERISA would allow an order requiring the employer to repay the employees if plaintiffs prevailed.

Marin had alleged that

  • Company officials told employees that complying with the ACA would cost the Employer over two million dollars and that they were reducing the number of full timers to avoid the liability;
  • That at restaurant meetings employees were told they were losing hours and health insurance;
  • That a Company official had told a newspaper that the employer was in the process of “adapting to upcoming changes associated with Healthcare reform;” and
  • The company reported in SEC filings that “Providing health insurance benefits to employees that are more extensive than the health insurance benefits we currently provide and to a potentially larger proportion of our employees, or the payment of penalties if the specified level of coverage is not provided at an affordable cost to employees, will increase our expenses.”

While defendants will properly argue that they have a right to make entrepreneurial decisions as to the necessary staffing and scheduling to provide the most economic labor cost (see Inter-Modal Rail Employees Assn. v. Atchison, Topeka and Santa Fe. Rlwy, 117 S.Ct. 1513 (1997)), employers should be wary of statements that suggest they are making staffing and scheduling decisions solely or principally on the basis of health care costs. Because of the potential for liability, some potential staffing patterns should be considered with an employer’s attorneys rather than non-attorney advisors. In addition, it may be that the Courts will recognize a difference between lowering hours of existing employees and setting new hire staffing patterns.

It is now clear that these and related issues will be developed over the next few years as more suits are brought and wend their way through the trial and appellate courts. In the meantime employers should be wary of what they say about healthcare issues, the ACA and benefit costs.

Five Recent Developments Employers in New York State or City Should Know

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Employers of all industries should be aware of the following five recent developments under New York State and New York City employment law.Evan J. Spelfogel

  1. Increased Minimum Wage

Effective December 31, 2015, three separate minimum wage increases took effect across New York State: (i) the nonexempt employee minimum wage increased from $8.75 per hour to $9.00 per hour; (ii) the minimum salary for executive and administrative exemptions increased from $656.25 per week to $675.00 per week; and (iii) the minimum pre tip wage for tipped employees in the hospitality industry increased to $7.50 per hour, with a corresponding reduction in the state’s tip credit to $1.50 per hour (provided that affected employees earn enough gratuities to cover the difference).

In addition, wages for fast food workers increased to $15 per hour, phased in over three years for workers in New York City, and over five-and-a-half years for workers in the rest of the state. Effective January 1, 2016, the new minimum wage rate for fast food workers became $10.50 per hour in New York City and $9.75 per hour throughout the rest of the state.

  1. Expanded Workplace Protections for Women

On January 19, 2016, a series of bills commonly as the “Women’s Equality Act” took effect. The bills expand the state’s gender-based employment protections and narrow the circumstances under which male and female employees may be paid different wage rates for jobs that require equal skill, effort, and responsibility, and that are performed under similar working conditions. Among other protections, the new laws:

  • bar employers from prohibiting employees from inquiring about, discussing, or disclosing their wages or the wages of other employees;
  • provide that aggrieved employees may recover liquidated damages equal to 300 percent of the unpaid wages owed for willful violations of the state’s equal pay law;
  • amend the state’s anti-discrimination laws to require that employers provide reasonable accommodations to employees because of a “pregnancy-related condition”;
  • add “familial status” (including child care) to the list of protected classes under the state’s anti-discrimination law, placing it on equal footing with race, sex, age, religion, and other statutorily protected characteristics
  • permit, for the first time, state courts and the New York State Division of Human Rights to award attorneys’ fees  to prevailing parties on sex discrimination claims; and
  • provide that sexual harassment claims may be asserted against employers regardless of the number of persons employed (previously, the law only applied to employers with four or more employees).

For more information about these bills, please see the Epstein Becker Green Act Now Advisory entitled “New York State Passes Five New Laws to Effectuate Gender Equality in the Workplace.”

  1. Limited Background Checks

Last autumn, New York City enacted two new laws that limit what employers may ask during the hiring process.

The first law, the “Stop Credit Discrimination in Employment Act,” bars employers from requesting or considering a prospective or current employee’s “consumer credit history” for employment purposes. There are narrow exemptions with respect to the employment of persons who would (i) have regular access to trade secrets and other highly sensitive employer information, or (ii) have fiduciary and signatory authority over third-party funds or assets valued at $10,000 or more.

The second law, the “Fair Chance Act,” prohibits employers from inquiring about a job applicant’s or current employee’s pending arrest or criminal conviction record until after an employer extends a conditional offer of employment to an applicant or has made a conditional offer of a promotion or wage increase to a current employee. After a conditional offer is extended, the employer may make such inquiries but must comply with procedures similar to those set forth in the federal Fair Credit Reporting Act.

For more information on these two new laws, please see the Epstein Becker Green Act Now Advisory entitled “Now That New York City’s Credit Check and “Ban the Box” Laws Are in Effect, How Do Employers Comply?

  1. Enhanced Transportation Benefits

Effective January 1, 2016, under New York City’s new Affordable Transit Act, employers with 20 or more “full-time employees” (defined as those working 30 or more hours per week) must offer their employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits (other than parking). Essentially, the new law requires employers to take advantage of the Internal Revenue Code’s qualified transportation fringe benefits provisions by allowing employees to pay for certain commuter expenses with pre-tax dollars.

Moreover, if, at any time, a covered employer’s workforce is reduced to fewer than 20 full-time employees, the employer must continue to offer the pre-tax benefit to all employees who were eligible for the benefit before the headcount reduction, for the duration of their employment.

The act contains several exemptions: it does not apply to (i) employees of government entities, (ii) employers that are parties to a collective bargaining agreement covering more than 20 full-time employees, or (iii) employers that are not required by law to pay federal, state, and city payroll taxes. Also, the law provides a six-month grace period: employers will not be subject to civil penalties for violations that occur before July 1, 2016.

For more information about these enhanced transportation benefits, please see the Epstein Becker Green Act Now Advisory entitled “NYC Affordable Transit Act: Employers Will Be Required to Offer Qualified Transportation Benefits in the New Year.”

  1. Added Protections for Transgender Workers

Effective this past October. 23, 2015, Governor Cuomo issued an executive order expanding the state’s anti-discrimination law to ban discrimination and harassment based on transgender status, gender identity, and gender dysphoria.



The U.S. Department of Justice Does Business No Favors By Significantly Delaying Website Accessibility Regulations Until 2018

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Joshua A. SteinFrustrating news has emerged from Washington D.C. as the recently-published federal government’s Fall Semiannual Regulatory Agenda revealed that the long-anticipated U.S. Department of Justice’s (“DOJ”) Notice of Proposed Rulemaking (“NPRM”) for regulations governing website accessibility for places of public accommodation under Title III of the Americans with Disabilities Act (“Title III”) would not be issued in the Spring of 2016 as most recently anticipated and would instead be delayed until fiscal year 2018.  DOJ now intends to issue a NPRM governing website accessibility for state and local governments under Title II of the ADA in early 2016 and then hopes that that process will create the necessary infrastructure to develop and promulgate similar regulations for entities governed by Title III

Such news is particularly troubling given the recent surge in website accessibility actions brought against places of public accommodation and business establishments operating exclusively in cyberspace by private plaintiffs, advocacy groups, and regulators at the federal, state, and local levels.  Indeed, notwithstanding DOJ’s latest delay, there is no indication that the federal government intends to cease its quest to have places of public accommodation provide accessible websites.  Relying upon Title III’s overarching civil rights obligations – most importantly that places of public accommodation provide “full and equal enjoyment” of its goods, services, etc. – DOJ continues to seek website accessibility provisions as part of its settlement agreements with a wide variety of places of public accommodation.  DOJ has even gone so far as to file Statements of Interest in private litigations ongoing between both Harvard University and the Massachusetts Institute of Technology and the National Association of the Deaf in the U.S. District Court for Massachusetts opposing their efforts to have the lawsuits dismissed or stayed pending DOJ’s completion of the rulemaking process.  (3:15-CV-30023 (D.Mass) and 3:15-CV-30224 (D.Mass))

The limited number of judicial decisions addressing the applicability of Title III to the websites of places of public accommodation and online businesses do not provide a clear road map for businesses due to the existence of a split body of case law.  The current law falls along three primary lines:  (i) Title III’s application is limited to actual physical places and cannot apply to websites absent an amendment to Title III or the issuance of new regulations; (ii) Title III applies to websites when there is a nexus between a physical place of public accommodation and the goods and services offered on its website; and (iii) Title III applies to even online-only businesses because Title III must be read broadly to promote the ADA’s goal of allowing individuals with disabilities to fully and equally enjoy and participate in society and, therefore, it must evolve to apply to new technologies.  The limited body of case law to date has developed primarily in the preliminary motion to dismiss phase and, therefore, the viability of various potential affirmative defenses or what it means for a website to be accessible has not be sufficiently analyzed by the courts. 

Further complicating the landscape, since DOJ announced its previous delay of the regulations (then into April 2016) this past spring, businesses across most industries – including retail, hospitality, financial services, and sports and entertainment – have been deluged with demand letters from industrious plaintiffs’ firms seeking to take advantage of the regulatory uncertainty and limited case law.  Understanding that the costs of litigating a developing area of the law may prove significant and the return uncertain, many businesses are opting to reach amicable resolutions to these matters rather than explore more aggressive litigation positions.  To the extent others hoped that DOJ guidance would soon stem the tide of these demand letters, this most recent development is disheartening news.  Businesses hoping to avoid such letters are best served by taking prophylactic actions to address the accessibility of their websites.

For more on these issues see:

October 15: Attend Epstein Becker Green’s Workforce Management Briefing – High Stakes and High Priorities

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34th Annual Workforce Management Briefing Banner

When:  Thursday, October 15, 2015    8:00 a.m. – 3:00 p.m.

Where:  New York Hilton Midtown, 1335 Avenue of the Americas, New York, NY 10019

This year, Epstein Becker Green’s Annual Workforce Management Briefing focuses on the latest developments that impact employers nationwide, featuring senior officials from the U.S. Department of Labor and the Equal Employment Opportunity Commission. We will also take a close look at the 25th anniversary of the Americans with Disabilities Act and its growing impact on the workplace.

In addition, we are excited to welcome our keynote speaker Neil Cavuto, Senior Vice President, Managing Editor, and Anchor for both FOX News Channel and FOX Business Network.

Our industry-focused breakout sessions will feature panels composed of Epstein Becker Green attorneys and senior executives from major companies, discussing issues that keep employers awake at night.  From the latest National Labor Relations Board developments to data privacy and security concerns, each workshop will offer insight on how to mitigate risk and avoid costly litigation.

View the full briefing agenda here. Contact Kiirsten Lederer or Elizabeth Gannon for more information and to register.   Seats are limited.

Five Evolving Issues Confronting Employers in the Hospitality Industry

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Our colleagues Jeffrey H. Ruzal, Steven M. Swirsky, Joshua A. Stein, Brandon C. Ge, Adam C. Solander, and Valerie Butera contributed to Epstein Becker Green’s recent Take 5 newsletter. In this edition, we address important employment, labor, and workforce management issues in the hospitality industry:

  1. The U.S. DOL’s Aggressive Moves to Expand FLSA Coverage
  2. The NLRB’s New Test for Determining Joint-Employer Status and Its Impact on Hospitality Employers
  3. At the 25th Anniversary of the ADA, How to Avoid Getting Bitten by Service Animal Complaints
  4. The Cadillac Tax: What Hospitality Employers Need to Know
  5. OSHA’s Revised Hazard Communication Standard

Read the full Take 5 here.

Epstein Becker Green’s Wage and Hour App Now Includes All 50 States and More

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Wage & Hour Guide for Employers AppWe’d like to share some news with hospitality employers: Epstein Becker Green has released a new version of its Wage & Hour Guide for Employers app, available without charge for Apple, Android, and BlackBerry devices.

Following is from our colleague Michael Kun, co-creator of the app and leader of our Wage and Hour group:

We have just updated the app, and the update is a significant one.

While the app originally included summaries of federal wage-hour laws and those for several states and the District of Columbia, the app now includes wage-hour summaries for all 50 states, as well as D.C. and Puerto Rico.

Now, more than ever, we can say that the app truly makes nationwide wage-hour information available in seconds. At a time when wage-hour litigation and agency investigations are at an all-time high, we believe the app offers an invaluable resource for employers, human resources personnel, and in-house counsel.

Key features of the updated app include:

  • New summaries of wage and hour laws and regulations are included, including 53 jurisdictions (federal, all 50 states, the District of Columbia, and Puerto Rico)
  • Available without charge for iPhoneiPad, Android, and BlackBerry devices
  • Direct feeds of EBG’s Wage & Hour Defense Blog and @ebglaw on Twitter
  • Easy sharing of content via email and social media
  • Rich media library of publications from EBG’s Wage and Hour practice
  • Expanded directory of EBG’s Wage and Hour attorneys

If you haven’t done so already, we hope you will download the free app soon.  To do so, you can use these links for iPhoneiPad, Android, and BlackBerry.

Coping With the New Definition of Exempt Employees: The Proposed New Salary Test May Not Benefit Currently Salaried Employees

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Under the Federal Fair Labor Standards Act (and state wage hour laws) certain hourly paid employees must be paid time and one-half their regular rate of pay for all hours worked over 40 in a regular work week.

But certain employees (for example many general managers and lead managers) are exempt from this requirement if they satisfy three qualifications imposed by federal regulations:

  1. The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed;
  2. the amount of salary paid must be at least $455 per week; and
  3. the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the “duties test”).

On July 6, 2015, the U.S. Department of Labor proposed a major change in the salary level test from $455 per week to $970 per week which if implemented would invalidate the exemption of any  currently exempt employee earning less than $970 per week ($50,440 annually) and reclassify those employees as non-exempt employees (pdf).

Such a reclassification could adversely impact the self-respect of many employees who believe that their salary is a mark of status superior to hourly paid rank and file employees and assures them of a regular paycheck in a regular amount each week.

In addition there is the specter of an employer having to pay hefty amounts for employees working many overtime hours or increasing head count to avoid overtime.

But there may be a silver lining for employers.  If the employer sets the regular rate for an employee reclassified from exempt to non-exempt at a rate which would yield an amount similar to the former salary when regular overtime is factored in, the employer may not be economically impacted and the employee will not get a government imposed raise for doing the same work s/he had always done.

Alternatively, under certain circumstances, the employer is permitted to pay a salary to non-exempt employees, which would help avoid the potential stigma of losing a salary and instead being paid an hourly wage, as discussed above.  This is known as the fluctuating work week method of paying overtime.

Here is how it works:

A non-exempt employee whose hours typically vary from week to week is paid a salary which is agreed to cover all hours worked in each regular workweek.  Thus, salary status is preserved.

To determine the amount of overtime owed, the regular rate is calculated by dividing the employee’s weekly salary by the number of hours worked each week. Since the salary covers all hours worked each workweek, the employer is only required to pay an additional half time amount for each hour worked over 40 in a workweek.

Here is an example:

Under the hourly rate of pay method of compensation, a non-exempt employee paid $20 per hour earns $800 for a forty hour week and must be paid $30 per hour for each hour worked over 40 in a workweek

If s/he works an additional 10 hours the employer must pay an additional $300 for that workweek for a total of $1,100 per week.

Under the fluctuating workweek calculation, the employee would be paid a salary.  Assuming the employee’s weekly salary is $800, if the employee works 50 hours in one workweek, the employer would calculate overtime by dividing $800 by 50 hours yielding a regular rate of $16 per hour.  Because the $800 salary is paid for all hours worked, the employer is only required to pay an additional half-time, which in this case is $8.00, for each of the ten hours worked in excess of 40.  Thus, the employer’s overtime exposure for this workweek is only $80 for a total of $880 per week, as opposed to $1,100 under the hourly rate of pay method.

Assuming the DOL’s proposed new regulations to increase the salary basis are implemented, employers can take measures to avoid the significant increase in their operating costs and help sustain profitability.

CAVEAT:  Check your state laws to see if the fluctuating work week method is allowed.  The New York State Hospitality Regulations (pdf) do not permit the fluctuating work week method for restaurant operations.  Thus, New York restaurant operations employers should set an hourly rate so as to minimize the cost of regular overtime.

Washington Court Dismisses Challenge to NLRB’s Ambush Election Rules

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My colleague Steven M. Swirsky at Epstein Becker Green published a Management Memo blog post concerning U.S. District Judge Amy Berman Jackson granting summary judgment in favor of the NLRB – “Washington Court Dismisses Challenge to NLRB’s Ambush Election Rules.”

Following is an excerpt:

U.S. District Court Judge Amy Berman Jackson on Wednesday issued a 72 page opinion (PDF) rejecting each of the arguments raised by the U.S. Chamber of Commerce, the National Retail Federation and other business groups and found that the Amended Election Rules adopted by the National Labor Relations Board in December 2014, which took effect in April 2015, in an action that argued that the Board had exceeded its authority, violated the Administrative Procedures Act and that the Amended Rules were unconstitutional.

Read the full original post here.

EEOC Rules Discrimination Based On Sexual Orientation Illegal Under Title VII

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My colleagues Nancy L. Gunzenhauser, Kate B. Rhodes, and Judah L. Rosenblatt at Epstein Becker Green have a Retail Labor and Employment Law blog post concerning a recent EEOC modification to employment discrimination protection: “EEOC Rules Discrimination Based On Sexual Orientation Illegal Under Title VII.”

Following is an excerpt:

The EEOC held that “[s]exual orientation discrimination is sex discrimination because it necessarily entails treating an employee less favorably because of the employee’s sex.”  The EEOC noted that sex-based considerations also encompassed gender-based considerations under Title VII. This ruling, if accepted by federal courts, would extend protection under Title VII to decisions made on the basis of sexual orientation. While only the Supreme Court can issue a final, definitive ruling on the interpretation of Title VII, EEOC decisions are given significant deference by federal courts.

Read the full original post here.

EEOC Updates Pregnancy Discrimination Guidance

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My colleagues Nathaniel M. Glasser and Kristie-Ann M. Yamane (a Summer Associate) at Epstein Becker Green have published a Financial Services Employment Law blog post concerning recent modifications to pregnancy discrimination that will be of interest to many of our readers: “EEOC Updates Pregnancy Discrimination Guidance.”

Following is an excerpt:

In the wake of the U.S. Supreme Court’s decision in Young v. UPS, [1]  the EEOC has modified those aspects of its Enforcement Guidance on Pregnancy Discrimination and Related Issues (“Guidance”) that deal with disparate treatment and light duty.

Under the prior guidance, issued in 2014, the EEOC asserted that a pregnant worker could prove a violation of the Pregnancy Discrimination Act (“PDA”) simply by showing that she was “treated differently than a non-pregnant worker similar in his/her ability or inability to work.”  The 2014 guidance also took the position that an employer could not refuse to offer a pregnant worker an accommodation by relying on a policy that provides light duty only to workers injured on the job.  The Supreme Court, however, was highly critical of and rejected this interpretation of the PDA, finding that it would require employers who provide a single worker with an accommodation to provide similar accommodations to all pregnant workers, irrespective of other criteria.

 Read the full original post here.