Our colleague David M. Prager at Epstein Becker Green has a post on the Wage and Hour Defense Blog that will be of interest to our readers in the hospitality industry: “Overtime: DOL Proposes to Raise Salary Level for Overtime Exemption to $35,308.

Following is an excerpt:

The U.S. Department of Labor has released a proposal to update the overtime rules under the federal Fair Labor Standards Act. Employers should be prepared to raise salaries to meet the minimum thresholds, pay overtime when appropriate, and otherwise adhere to the new rules if they go into effect.

Federal overtime provisions are contained in the Fair Labor Standards Act (“FLSA”). Unless exempt, employees covered by the FLSA must receive overtime pay for hours worked over 40 in a workweek. To be exempt from overtime (i.e., not entitled to receive overtime), an exemption must apply. For an exemption to apply, an employee’s specific job duties and salary must meet certain minimum requirements. The “salary test” presently requires workers to make at least $23,660 on an annual basis to be exempt from overtime. …

Read the full post here.

Our colleagues Jeffrey H. Ruzal, Adriana S. Kosovych, and Judah L. Rosenblatt, attorneys in the Employment, Labor & Workforce Management practice, co-authored an article in Club Director, titled “Recent Trends in State and Local Wage and Hour Laws.”

Following is an excerpt:

As the U.S. Department of Labor (DOL) appears to have relaxed its employee protective policy-making and enforcement efforts that grew during the Obama administration, increasingly states and localities have enacted their own, often more protective, employee-protective laws, rules and regulations. To ensure full wage and hour compliance, private clubs should consult their HR specialists and employment counsel and be mindful of all state and local requirements in each jurisdiction in which they operate and employ workers. Here are just some of the recent wage and hour requirements that have gained popularity among multiple jurisdictions.

Click here to download the full version in PDF format.

Our colleague  at Epstein Becker Green has a post on the Wage and Hour Defense blog that will be of interest to our readers in the hospitality industry: “Federal Court Concludes That 7-Eleven Franchisees Are Not Employees of 7-Eleven.

Following is an excerpt:

In November 2017, four convenience store franchisees brought suit in federal court against 7-Eleven, Inc., alleging that they and all other franchisees were employees of 7-Eleven. The case was filed in the United States District Court for the Central District of California, entitled Haitayan, et al. v. 7-Eleven, Inc., case no. CV 17-7454-JFW (JPRx).

In alleging that they were 7-Eleven’s employees, the franchisees brought claims for violation of the federal Fair Labor Standards Act (“FLSA”) and the California Labor Code, alleging overtime and expense reimbursement violations. The trial court granted judgment in 7-Eleven’s favor, concluding that 7-Eleven was not the four franchisees’ employer under California law or federal law. …

Read the full post here. 

The new episode of Employment Law This Week offers a year-end roundup of the biggest employment, workforce, and management issues in 2016:

  • Impact of the Defend Trade Secrets Act
  • States Called to Ban Non-Compete Agreements
  • Paid Sick Leave Laws Expand
  • Transgender Employment Law
  • Uncertainty Over the DOL’s Overtime Rule and Salary Thresholds
  • NLRB Addresses Joint Employment
  • NLRB Rules on Union Organizing

Watch the episode below and read EBG’s Take 5 newsletter, “Top Five Employment, Labor & Workforce Management Issues of 2016.”

On May 18, 2016, the U.S. Department of Labor (“DOL”) announced the publication of a final rule that amends the “white collar” overtime exemptions to significantly increase the number of employees eligible for overtime pay. The final rule will go into effect on December 1, 2016.

The final rule provides for the following changes to the executive, administrative, and professional exemptions:

  • The salary threshold for the executive, administrative, and professional exemptions will increase from $23,660 ($455 per week) to $47,476 ($913 per week).
  • The total annual compensation requirement for “highly compensated employees” subject to a minimal duties test will increase from the current level of $100,000 to $134,004.
  • The salary threshold for the executive, administrative, professional, and highly compensated employee exemptions will be automatically updated every three years to maintain the standard salary level at the 40th percentile of full-time salaried workers in the lowest-wage census region.
  • The salary basis test will be amended to allow employers to use non-discretionary bonuses and incentive payments, such as commissions, to satisfy up to 10 percent of the salary threshold.

While it is certainly good news that the DOL has not changed the primary duties requirements for the various exemptions, the significant increase to the salary threshold is expected to extend the right to overtime pay to an estimated 4.2 million workers who are currently exempt. This change will not only affect labor costs but require employers to rethink the current structures and efficiencies of their workforces, including assessing how the reclassification of workers from exempt to non-exempt will affect their fundamental business models. In addition, to the extent exempt employees are reclassified as non-exempt, employers will have to consider implementing policies and procedures to both comply with overtime laws and control overtime worked, such as prohibiting all forms of off-the-clock work and instituting and maintaining accurate record-keeping.

Resistance to the final rule should be expected. The DOL received nearly 300,000 comments to its Notice of Proposed Rulemaking, many of which came from employers and advocacy groups providing thoughtful commentary on the practical issues and repercussions in implementing such a significant increase to the salary threshold. Because of the severity of the final rule, a Congressional challenge may be in the offing. Subject to the Congressional Review Act, the final rule will be subject to scrutiny by the next Congress to be seated in 2017.

What Hospitality Employers Should Do Now

With the benefit of more than six months until the final rule takes effect, hospitality employers should do the following:

  • Audit your workforce to identify employees currently treated as exempt who will not meet the new salary threshold.
  • Closely examine your workforce to determine whether any of your currently exempt employees fail to meet the salary threshold of the new rule.
  • Take advantage of this time to also review your exempt employees’ primary duties, even though the duties test has not been changed by the new rule. Some job positions in hospitality that have been susceptible to failing the primary duties requirements include entry-level managers, catering managers, executive chefs, and sous chefs. There is no time like the present to conduct a comprehensive self-audit to ensure full compliance.
  • When auditing the exempt status of your workers, determine whether to increase their salaries or convert them to non-exempt. If an employee’s salary need only be increased slightly to satisfy the new rule, it may be an easy decision to simply provide the employee with that salary increase. But if you would have to provide a substantial salary increase to meet the new threshold, it may be easier to reclassify the employee as non-exempt.
  • Keep in mind that converting employees from exempt to non-exempt implicates a number of other issues that you would be wise to deliberate carefully, such as estimating how much overtime an individual is expected to work in order to determine what an employee’s new hourly rate will be and ensuring compliance with the overtime laws.

A version of this article originally appeared in the Take 5 newsletter “Five Key Issues Facing Employers in the Hospitality Industry.”

I recently wrote a Wage and Hour Defense blog post with my colleague Michael S. Kun and it will be of interest to all hospitality employers – “Proposed DOL Rule To Make More White Collar Employees Eligible For Overtime Pay.”Clock

Following is an excerpt:

More than a year after its efforts were first announced, the U.S. Department of Labor (“DOL”) has finally announced its proposed new rule pertaining to overtime. And that rule, if implemented, will result in a great many “white collar” employees previously treated as exempt becoming eligible for overtime pay for work performed beyond 40 hours in a workweek – or receiving salary increases in order that their exempt status will continue.

Read the full original post here.

By:   Jordan Schwartz

The holiday season is often the busiest time of the year for hospitality employers. At the same time, employees may appreciate the opportunity to earn more during these busy months. Consequently, there may be occasions when an employer places an employee in a dual capacity role. For example, from November through January, a hotel may permit (or require) a housekeeping attendant to also function as a front desk reservation assistant. While assigning (or permitting) an employee to work at another post with a different rate of pay is generally permissible and may be preferable to hiring additional employees for the holiday rush, there are complex “wage & hour” factors to consider prior to doing so. 

The payment of wages is governed by the federal Fair Labor Standards Act (“FLSA”) and applicable state law. Under the FLSA, non-exempt employees must properly be compensated for all work performed, including overtime at a rate of one and one-half times their regular rate of pay for all hours worked in excess of 40 in a workweek.

Since overtime must be based on the employee’s “regular rate of pay,” calculating the overtime amount can be tricky when an employee works two or more jobs for which the employee is paid different rates of pay. Let us assume, first, that the housekeeping attendant position and the front desk reservation assistant position are both “non-exempt” positions. A common assumption in such a scenario is that the employee would receive overtime pay based on the rate of pay of the job at which he is working when he passes the 40-hour threshold. Absent a prior agreement between the employer and the employee, however, this assumption is false. Rather, according to the FLSA regulations, the employee’s regular rate of pay when he works two jobs is calculated as the weighted average of the different rates. Consequently, to determine the employee’s “regular rate of pay” in this scenario, his weekly earnings from his job as housekeeping attendant and his weekly earnings from his job as front desk reservation assistant are added together, and the total is then divided by the total number of hours worked at both jobs.  The employee would then be entitled to 1.5 times this rate of pay for all hours worked over 40 in a workweek.

To complicate matters further, let us assume that the housekeeping position is exempt, while the front desk reservation assistant position is non-exempt. In this scenario, the key issue that must be addressed is how this employee should be classified, since an employee may have only one FLSA designation and cannot simultaneously be classified as both exempt and non-exempt. 

According to the U.S. Department of Labor (“DOL”), to determine exempt status in such a scenario, the employee’s “primary duty” must be analyzed. The term “primary duty” means the principal, main, major or most important duty that the employee performs, with the major emphasis on the character of the employee’s job as a whole. Once this analysis is performed, the employer can appropriately determine whether the employee is exempt or non-exempt. If the combined duties would qualify the employee to remain in exempt status, there would be no requirement to pay the employee any additional salary above his normal weekly salary, although the employer could compensate the employee further for the additional work performed without compromising his exempt status.

If however, after analyzing the employee’s primary duty it was concluded that he was non-exempt, the employee would be eligible to receive overtime pay for all hours worked over 40 in a workweek. Once again, if overtime pay is required, absent a prior agreement otherwise, no attention should be paid as to which particular job the employee is performing when he crosses the 40-hour threshold. Rather, the employer will need to calculate the employee’s regular rate of pay as the weighted average of the different rates, and employee would then be entitled to 1.5 times this rate of pay for all hours worked over 40 in a workweek

As explained above, employers are not prohibited from—or required to—permit employees to work for more than one job for them, although in certain circumstances during the busy holiday season, doing do may be a prudent option for hospitality employers. It is crucial, however, to be cognizant of the “dual employment” wage and hour requirements of both the FLSA and applicable state law. Failure to abide by these requirements could remove all the cheer from the holiday season. 

By:  Kara M. Maciel

The Department of Labor’s Wage and Hour Division in Norfolk, Virginia has announced that it will be stepping up its compliance audits and enforcement efforts against area hotels. In the past few years, the DOL stated it found violations at about 60% of local hotels. According to the DOL, the agency recently made spot checks at 10 area hotels since April. This is just one part of the agency’s nationwide enforcement program and its “Plan/Prevent/Protect” initiative against the hospitality industry. Common violations assessed by the DOL include:

·         Payment of overtime. Under the FLSA, employees are entitled to overtime for any hours worked over 40 per week. For employers who have multiple hotels or facilities, when employees work at different locations in a work week, it is imperative that the employer coordinate its payroll systems to aggregate the employee’s time worked at both jobs in order to ensure that proper overtime is being paid. The DOL is finding that when an employee works at one hotel 20 hours per week, and 25 hours at another hotel, the employee is not paid overtime.   

·         Unlawful deductions. Many hospitality employers require employees to reimburse the hotel for a uniform through payroll deductions. However, an employer may not lawfully deduct from an employee’s wages for the cost of a uniform if it reduces the employee’s hourly wage below the minimum wage. Thus, for employees who are paid the minimum wage or tipped employees for whom the employer takes the tip credit, the hotel cannot deduct for a uniform if it drops the employee below the minimum wage.     

·         Working through meal breaks. Another common violation in the hospitality industry relates to workplaces in which the employer voluntarily provides a meal break. Under the FLSA, if an employer allows an employee to take at least a 30 minute meal break, the employee must be completely relieved of duty and the break must be uninterrupted. If an employee clocks out for lunch, and then is asked to clock back in to perform some work, the employee must be paid for the entire meal break, and not just for the time back on the clock. For many employers who automatically deduct for meal breaks or who fail to pay for the full meal period when it is interrupted, this could represent a significant liability. 

Now, more than ever, employers in the hospitality industry should be vigilant in their wage and hour compliance with federal and state law. Especially in light of the DOL’s recent roll-out of its Smartphone “app,” which allows workers to track their hours and evaluate the amount of overtime earned, workers are being armed with ample resources to bring claims of unpaid wage against the employers. 

As part of our Hospitality Employment and Labor Law Outreach (HELLO), we are familiar with these recent enforcement efforts against the hospitality industry and have been working with our hotel and restaurant clients to minimize costly exposure raised by these claims. Through regular self-audits of payroll practices and procedures, conducted under the attorney-client privilege, a hotel can significantly limit exposure from a DOL investigation or private class action. 

By: Kara M. Maciel and Forrest G. Read, IV

The U.S. Court of Appeals for the Eleventh Circuit’s recent decision in Diaz v. Jaguar Rest. Group, LLC underscores the importance for hospitality employers to know which job duties their employees are performing in order to assert every potentially applicable affirmative defense when answering an employee’s FLSA lawsuit for non-payment of overtime. In Diaz, the Eleventh Circuit reversed the trial court’s decision that a restaurant, which failed to raise the administrative exemption to the overtime requirement at any point until shortly before trial, was permitted to amend its Answer and include that defense at the close of its case at trial.

The jury determined that Diaz, a formerly employed bookkeeper, “was an administrative employee” who “performed numerous administrative tasks in addition to her bookkeeping duties.” Diaz “managed the cash register, distributed tips, opened bank accounts, maintained menus, processed new employees into the system, ran errands, managed liquor orders, and occasionally opened the restaurant.” However, the Eleventh Circuit concluded that those facts could not help the restaurant in the absence of its earlier assertion of the administrative exemption.

Hospitality employers should carefully track which duties their employees are performing. Armed with that knowledge, they can better assess whether a bookkeeper, a bartender, a bellhop, or any other employee who may “wear different hats” can be deemed to have performed duties involving the management of some part or function of the hotel’s operations. They should also remember that the administrative exemption is subject to a fact-intensive inquiry into job duties and not applicable based merely on job title. Even if at first blush an employee’s job title may not seem administrative, it is wise to assert the administrative exemption when answering an overtime complaint under the FLSA if the job duties actually performed can be construed as managerial or involving discretion. Otherwise, the hotel may be left wondering “what might have been?”