Hospitality remains at the forefront of demanding industries where employers must be ever vigilant in their efforts to ensure full compliance with federal, state, and local employment laws and regulations. We highlight below five new or upcoming areas on which employers should focus.

Jeffrey H. Ruzal

Hospitality Employers May Soon Face a Compliance Challenge: The New Proposed DOL Salary Threshold for “White Collar” Exemptions

Michael S. Kun

The Department of Labor (“DOL”) has proposed a new rule that would increase the salary threshold for most “white collar” exemptions under the Fair Labor Standards Act (“FLSA”) from $23,600 per year ($455 per week) to $35,308 per year ($679 per week). If adopted, as expected, the rule would go into effect on January 1, 2020.

Many hospitality employers employ “white collar” exempt employees who earn more than $23,600 but less than $35,308 per year, and they will face the important and challenging decision of whether to increase some employees’ salaries or convert them to non-exempt status. This decision will directly impact not only employees but also employers’ budgets and compensation structures. Employers should act now to plan ahead for the adoption of the new rule:

  1. Identify employees currently treated as FLSA exempt who are paid less than $35,308 per year, as those are the persons for whom this decision will need to be made.
  2. Confirm that each employee meets the “duties test” for the exemption, as that would not change under the new rule.
  3. Decide whether to increase each identified employee’s salary to the $35,308 threshold or to convert the employee to non-exempt.
  4. If converting an employee from exempt to non-exempt, determine what the employee’s new hourly rate will be.
  5. Prepare to implement changes by January 1, 2020, including coordination with the payroll department or vendor.

States Target Restaurants for Anti-Harassment Training Legislation

Anastasia A. Regne and Adriana S. Kosovych

Harassment prevention in the workplace continues to be top of mind for employers in all industries—particularly in New York and California, which now statutorily require harassment training. Restaurant employers are the current target of proposed legislation in certain states that would require the adoption of sexual harassment policies and periodic mandatory harassment training for their workforce.

In January, the New Jersey Legislature introduced a bill (A4831) that would require restaurants employing 15+ employees to provide, at hire and throughout the employment relationship, interactive sexual harassment training tailored to the restaurant industry, including practical examples and instruction on how to file a sexual harassment complaint. Illinois’ proposed (and broader) Restaurant Anti-Harassment Act similarly would require sexual harassment training for all restaurant employees covering a range of topics, within 90 days of enactment or at hire, and every two years thereafter. Both bills call for separate training for employees and management, each with its own set of requirements. Anything other than strict compliance would carry significant fines for violations, and in New Jersey, even strict compliance would not help the employer avoid sexual harassment liability.

Restaurant employers should be proactive in preparing for the enactment of this and any other legislation. Epstein Becker Green’s Halting Harassment offers compliant training programs to employers in states that currently require such training, and will also develop such programs for other jurisdictions that enact such laws, including New Jersey and Illinois.

DOL Formally Withdraws and Replaces 80/20 Guidance

Paul DeCamp

In 1988, the DOL amended an internal agency handbook to include an interpretation barring employers from taking a tip credit for activities that do not generate tips (tasks such as rolling silverware or cleaning tables, known in the restaurant industry as “side work”) if an employee spends more than 20 percent of his or her working time on those activities. In November 2018, the DOL (re)issued an opinion letter rejecting that interpretation. On February 15, 2019, the DOL followed up on the opinion letter by withdrawing the 1988 handbook interpretation and replacing it with a new standard that does not tie the availability of the tip credit to the amount of side work performed. Under the new guidance, the tip credit is available so long as the employee performs side work contemporaneously with, or within a reasonable time of, tip-generating activities. State law, of course, may vary.

Don’t Be Caught Off Guard This Summer by Your Internship Program

Ann Knuckles Mahoney

With summer right around the corner, internship season is about to kick off. Internship programs can help employers source and develop talent, but they do not come without their pitfalls. For many years, the DOL used the “six-factor test” when determining whether an employee was legally considered an unpaid intern, such that the intern would not be subject to the wage and hour requirements of the FLSA. This changed at the beginning of 2018, when the DOL adopted the “primary beneficiary test” in a move allowing increased flexibility for employers and greater opportunity for unpaid interns to gain valuable industry experience. Employers that fail to follow the requirements to ensure that an intern is properly treated as an unpaid intern, rather than an employee who is entitled to minimum wages and overtime, could face costly wage and hour litigation. Access our recent webinar on what employers need to know to create a legally compliant unpaid internship program and to learn more about practical considerations for both paid and unpaid internship programs.

Are You a Joint Employer? That May Change Under the DOL’s Proposed New Test

Adriana S. Kosovych and Jeffrey H. Ruzal

As announced in an April 1, 2019, Notice of Proposed Rulemaking, the DOL has proposed to substantially revise the standard for determining joint-employer status conferring joint and several liability upon the primary employer and any other joint employers for all wages due to employees under the FLSA. Unlike the current regulations—under which two or more entirely independent entities may be found to jointly employ an employee who performs work in a workweek that simultaneously benefits both of them if they are “not completely disassociated” with respect to that individual’s employment—the proposed new rule would determine joint-employer status by a four-part test assessing whether the potential joint employer actually exercises the power to (1) hire or fire, (2) supervise and control work schedules or conditions of employment, (3) determine the rate and method of payment, and (4) maintain employment records. While additional factors may be considered, the proposed rule explains that an employee’s “economic dependence” on the employer would not be relevant under the new standard, nor would certain business models and practices and contractual agreements be pertinent.

The DOL’s proposal coincides with similar rulemaking activity by the National Labor Relations Board (“NLRB”) in September 2018. Under the NLRB’s proposal, two employers would be considered joint employers only when the putative joint employer possesses and exercises “substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine.” The period for comments on the NLRB’s proposed rule closed on January 28, 2019, and it is anticipated that the rule will be formally adopted later this year. The comment period in the DOL’s proposed rule is set to close on June 10, 2019. Hospitality owners/operators should stay tuned for further developments on both fronts, as joint-employer status is often a point of dispute when an employee lodges claims against one or more putative employers.

Read the Take 5 on our website.

This Employment Law This Week® Monthly Rundown discusses the most important developments for employers heading into May 2019.

First up this month, the confusion is over for employers. EEO-1 pay data does not need to be submitted to the EEOC by the end of the month. In what may be the final chapter of the EEO-1 pay data reporting issue, a federal judge in Washington, D.C., ruled that the deadline would be postponed until September 30, 2019. Our colleague Robert J. O’Hara shares his insights in this month’s episode.

Watch the full episode below. 

On April 25, a U.S. District Court in Washington, D.C. ruled that the EEOC must collect Component-2 wage/hours worked data from employers by September 30, 2019.  The Court also ordered EEOC to collect two pay years (2018 and either 2017 or 2019). If the EEOC choses 2017 it will also be due on September 30.  If it chooses 2019, that data will be due March 31, 2020. The EEOC has until May 3 to determine which additional year will be collected.

The bottom line is that employers who file EEO-1’s now have two deadlines:  May 31 for the traditional race/ethnicity and gender snapshot, and September 30 for the new wage and hours worked report. More than 80,000 employers are required to file EEO-1s and most are not prepared for the new reporting requirement. Component-2 filing will not commence until mid-summer as EEOC’s data systems are not equipped to receive the massive wage/hours worked data submissions.  Component 2 has 25 times the number of data fields of Component 1!  In order to comply with the judicial order, EEOC now has to outsource the collection to a third party—and they are just beginning that process.

Webinar – Spring/Summer 2019

Internship programs can help employers source and develop talent, but they do not come without their pitfalls. If you are an employer at a tech startup, a large financial institution, a fashion house, or something else entirely, and you plan on having interns this summer, this webinar is for you. Learn the steps for creating a legally compliant internship program.

For many years, the U.S. Department of Labor (“DOL”) used the “six-factor test” when determining whether an employee was legally considered an unpaid intern, such that the intern would not be subject to the wage and hour requirements of the Fair Labor Standards Act. This changed at the beginning of 2018, when the DOL adopted the “primary beneficiary test” in a move allowing increased flexibility for employers and greater opportunity for unpaid interns to gain valuable industry experience. Employers that fail to follow the requirements to ensure that an intern is properly treated as an unpaid intern, rather than an employee who is entitled to minimum wages and overtime, could face costly wage and hour litigation.

Our colleagues Jeffrey M. LandesLauri F. Rasnick, and Ann Knuckles Mahoney guide viewers on how they can establish lawful unpaid internship programs. This webinar also addresses the extent to which wage and hour laws apply to interns, and the seven factors that make up the “primary beneficiary test.” This webinar provides viewers practical tips for administering an internship program, whether paid or unpaid, by identifying key considerations for all stages of the internship process.

Click here to request complimentary access to the webinar recording and presentation slides.

[Update: The measure was signed into law by Governor Mills on April 12, 2019.]

On April 2, 2019, the Maine Legislature celebrated Equal Pay Day by passing two significant amendments (“Amendments”) to the Maine Equal Pay Act. If, as expected, Governor Janet Mills signs the measure, certain salary history inquiries and employer policies prohibiting employee wage discussions will be deemed “evidence of discrimination.”  While the Amendments do not directly “prohibit” such inquiries and policies, in effect, they operate as a ban on such conduct.

Specifically, the Amendments state that employers, either directly or indirectly (such as through an employment agency) may not inquire about or seek a job applicant’s compensation history from either the prospective employee or the prospective employee’s prior employers. Further, an employer may not require that a prospective employee’s prior wage history meet certain criteria. However, once an offer that includes all terms of compensation has been negotiated and made to the prospective employee, the employer or its agent may inquire about or confirm the prospective employee’s wage history.

Notably, if a prospective employee voluntarily discloses his or her wages without prompting by the employer, the employer may inquire about or seek to confirm the wage history prior to an offer of employment being extended.

Further, the Amendments do not apply to employers that make compensation inquiries when a federal or state law requires disclosure of a prospective employee’s compensation history.

The Amendments do not define “compensation” or “wage history,” so it is unclear if they are referring to just salary or include other benefits as well, such as bonuses or deferred compensation.

The Amendments also state that employers may not prevent employees from discussing their or another employee’s compensation. The wage transparency provision does not contain any carve-outs for employees who gain access to employee compensation as a result of their position at the company, such as human resources professionals. The provision also lacks safeguards to protect employees from disclosure of their wage information without their permission.

If signed, the Amendments will go into effect on September 17, 2019, and Maine will become the fourteenth jurisdiction to restrict inquiries into prospective employee’s salary history before the applicant receives a conditional offer of employment. The other states with such restrictions are California, Connecticut, Delaware, Hawaii, Massachusetts, Oregon, and Vermont, along with such cities as New York City, San Francisco, and most recently, Cincinnati. A similar Philadelphia law was partially struck down last year and currently is on appeal to the U.S. Court of Appeals for the Third Circuit.

Accordingly, Maine employers should review their job applications and hiring practices, as well as any policies that prohibit or restrict employee discussions of wages, to ensure that they are compliant with the forthcoming law.

In the first meaningful revision of its joint employer regulations in over 60 years, on Monday, April 1, 2019 the Department of Labor (“DOL”) proposed a new rule establishing a four-part test to determine whether a person or company will be deemed to be the joint employer of persons employed by another employer. Joint employer status confers joint and several liability with the primary employer and any other joint employers for all wages due to the employee under the Fair Labor Standards Act (“FLSA”), and it’s often a point of dispute when an employee lodges claims for unpaid wages or overtime.

Under current DOL regulations, two or more employers acting entirely independently of each other may be deemed joint employers if they are “not completely disassociated” with respect to the employment of an employee who performs work for more than one employer in a workweek. In its proposal – a sharp departure from earlier Obama-era proposals to broaden the test for determining joint employer status to one based on economic realities – the DOL seeks to abandon the “not completely disassociated” test and has proposed to replace it with a four-part balancing test derived from Bonnette v. California Health & Welfare Agency, a 1983 decision by the Ninth Circuit Court of Appeals. Under the new rule, joint employer status would be determined by considering four key factors assessing whether the potential joint employer actually exercises the power to:

  • Hire or fire the employee;
  • Supervise and control the employee’s work schedules or conditions of employment;
  • Determine the employee’s rate and method of payment; and
  • Maintain the employee’s employment records.

Additional factors may be considered if they are indicative of whether the potential joint employer is (1) exercising significant control over the terms and conditions of the employee’s work, or (2) otherwise acting directly or indirectly in the interest of the employer in relation to the employee. Note that under the DOL’s proposal, it would not be necessary for each of these factors to be present for a joint-employer relationship to be found.

This revised standard would apply with respect to only one of the two potential joint employer scenarios under the FLSA – where the work performed by an employee for the primary employer simultaneously benefits a second person or company. Notably, the DOL has not proposed to make any substantive revisions to the regulations addressing the scenario where an employee works separate hours for multiple employers in the same workweek.

The proposed new rule explains that an employee’s economic dependence on the putative joint employer does not determine the potential joint employer’s liability under the FLSA and identifies three examples of “economic dependence” factors – which commonly arise in the context of independent contractor analysis – that are not relevant to the assessment of joint employer status:

Whether the employee –

  1. Is in a specialty job or a job that requires special skill, initiative, judgment or foresight;
  2. Has the opportunity for profit or loss based on his or her managerial skill; and
  3. Invests in equipment or materials required for work or the employment of helpers.

In providing guidance on how to apply this multi-factor test, the DOL also clarifies in the proposed new rule that particular business models (such as a franchisor), business practices (providing a sample employee handbook or allowing an employer to operate a facility on one’s premises, etc.), and contractual agreements (such as sexual harassment policies or requirements to comply with the law) do not make joint employer status more or less likely.

The proposed rule and the DOL’s News Release include nine illustrative examples showing how the new rule would apply in various illustrative scenarios.  Particularly relevant to owners/operators in the hospitality industry, one example is a country club that contracted with a landscaping company to maintain its golf course. In this example, the contract between the club and landscaper did not give the club authority to hire, fire or supervise landscaping employees, but in practice, a club official oversaw the work of the landscaper’s employees by “sporadically assigning them tasks throughout each workweek, providing them with periodic instructions during each workday, and keeping intermittent records of their work.” Moreover, at the country club’s direction, the landscaping company agreed to terminate an individual worker for failure to follow the club official’s instructions. Applying the proposed new rule to these facts, the DOL concludes that the country club would be a joint employer of the landscaping contractor’s employees because the club “exercises sufficient control, both direct and indirect,” over the landscaper’s employees’ terms and conditions on what the DOL states “amounts to a regular basis,” pointing out that such control was further established by the fact that the country club indirectly fired one of the contractor’s employees.

Other examples in the proposed rule address various scenarios that are specific to the relationship between two entities, such as a franchisor and its franchisees, noting for example that a franchisor or hotel management company providing “samples, forms, and documents” to franchisees “does not amount to direct or indirect control” by the franchisor over franchisees’ employees and thus would not subject the franchisor to joint liability for franchisees’ FLSA violations.

Why is the DOL overhauling the joint employer regulations?

In its Notice of Rulemaking, the DOL references similar efforts by the National Labor Relations Board (“NLRB”) to alter its analysis for determining joint employer status under the National Labor Relations Act (“NLRA”). Unlike the DOL regulations, the NLRB joint employer standards have undergone multiple revisions – and reversals of those revisions – since 2015 and currently, the NLRB is engaged in rulemaking that would again revise this test. Under the NLRB’s proposed rule, published on September 14, 2018, employers would only be considered joint-employers where the putative joint employer possesses and exercises “substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine.” The period for comments on the NLRB’s proposed rule closed on January 28, 2019, and it is anticipated that the rule will be formally adopted later this year.

The DOL also points to legislative activity on the issue, including hearings by Congress and concern raised by multiple U.S. Representatives and Senators. The DOL states in the Notice that these and other developments have generated a tremendous amount of attention, concern, and debate about joint employer status in every context, including the FLSA.

According to the DOL, it designed the proposed new rule to “promote certainty for employers and employees, reduce litigation, and encourage innovation in the economy.” The revisions could have significant implications for employers across all industries, and particularly in the hospitality industry, such as franchisors, businesses, or clubs utilizing contractors and staffing firms or operating in partnering arrangements, as well as those engaged in providing temporary and other contingent workers. If put into effect, the new rule could lead to reduced litigation and compliance costs by limiting claims against putative joint employers, as well as greater uniformity among court decisions. The DOL also suggests that the new rule could promote innovation and certainty in business relationships.

Stakeholders and the public have 60 days to submit comments on the proposed new joint employer rule. We will continue to monitor this important development.

Our colleague Tzvia Feiertag at Epstein Becker Green has a post on the Health Employment and Labor Blog that will be of interest to our readers in the hospitality industry: “NJ Employers and Out-of-State Employers with NJ Residents Prepare: State Updates Website on Employer Reporting for New Jersey Health Insurance Mandate.”

Following is an excerpt:

As employers are wrapping up their reporting under the Affordable Care Act (“ACA”) for the 2018 tax year (filings of Forms 1094-B/C and 1095-C/B with the IRS are due by April 1, 2019, if filing electronically), they should start preparing for new reporting obligations for the 2019 tax year.

After a string of failed efforts to repeal the ACA, Congress, through the Tax Cuts and Jobs Act of 2017 (“TCJA”), reduced the federal individual shared responsibility payment assessed (with limited exceptions) against individuals who failed to purchase health insurance to $0 beginning January 1, 2019. In response, to ensure the stability and provide more affordable rates for health coverage, States, such as New Jersey, have stepped in and adopted their own individual health insurance mandates. New Jersey’s individual health insurance mandate requires employers to verify health coverage information provided by individuals. To assist with employer reporting, New Jersey has launched an official website (lasted updated on March 19, 2019) with guidance on the filing requirements. …

Read the full post here.

Our colleagues Jeff Landes, Jeff Ruzal, and Adriana Kosovych are featured on Employment Law This Week – Predictive Scheduling Laws, the New Normal? – Deep Dive Episode speaking on predictive scheduling laws and the impact on business. Taking the guesswork out of scheduling for wage workers is an attractive proposition for regulators. Laws that require employers to publish employee work schedules a certain amount of time in advance so that employees (especially those in the hospitality and retail industries) can have greater flexibility and work-time predictability to deal with family and other events and responsibilities are becoming more common in several cities, and the state of Oregon currently has predictive scheduling laws on the books, and the trend is growing, with proposed legislation in many jurisdictions across the country.

Watch the segment below.

Our colleague Sharon L. Lippett at Epstein Becker Green has a post on the Health Employment and Labor Blog that will be of interest to our readers in the hospitality industry: “A Reminder from the DOL: Document a Plan’s Procedures for Designating Authorized Representatives.”

Following is an excerpt:

While the Information Letter does not directly respond to the query from counsel to the Entity, the DOL’s response indicates that the Entity could be an authorized representative. The DOL states that, although a plan may establish reasonable procedures for determining whether an individual has been authorized to act on behalf of a claimant, “the procedure cannot prevent claimants from choosing for themselves who will act as their representative or preclude them from designating an authorized representative for the initial claim, an appeal of an adverse benefit determination, or both.”

The Information Letter further provides that the description of claim and appeal procedures included in a plan document and in the summary plan description for the plan must include any procedures for designating authorized representatives.  The Information Letter references the Benefit Claims Procedures Regulation FAQs, (the “FAQs”) which include FAQs on the appointment of authorized representatives. FAQ B-1 provides that, with one exception, an example of a reasonable procedure that a plan may establish to determine an authorized representative is completion of a form by the claimant identifying the authorized representative. The exception is where a claim involves urgent care, in which case a plan must permit a health care professional with knowledge of the claimant’s medical condition to act as the authorized representative if the claimant is not able to act on his or her own behalf.

Read the full post here.

Our colleague Nancy Gunzenhauser Popper at Epstein Becker Green has a post on the Retail Labor and Employment Law Blog that will be of interest to our readers in the hospitality industry: “April Fools’ Joke? No—NYC Employers Really Have Two Sets of Training Requirements.”

Following is an excerpt:

Don’t forget – April 1 marks the beginning of a new set of sexual harassment training requirements in New York City. While the training requirement began across New York State on October 9, 2018 (and must be completed by October 9, 2019), the City imposes additional requirements on certain employers. Both laws require training to be provided on an annual basis.

While the State law requires training of all New York employees, regardless of the number of employees in the State, the City law applies only to employers with 15 or more employees. However, when counting employees under the City law, an employer must also count independent contractors who work for the employer in New York City.

Read the full post here.