Articles Posted in Wage and Hour Laws

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Thousands of current and former employees of the restaurant chain Chipotle have reportedly returned paperwork indicating their intent to join a lawsuit against Chipotle for wage theft.  The paperwork went out to current and former Chipotle employees in April and indicated that employees who worked “off the clock” for Chipotle could join the lawsuit.  Since then, nearly 10,000 current and former employees have joined the lawsuit.

The lawsuit alleges that Chipotle employees who worked the closing shift were automatically and routinely clocked out before they finished working.  Some managers even allegedly asked Chipotle employees to work after they were clocked out.  This is a classic form of wage theft and, given the number of workers who have opted-in to the lawsuit so far, it may have been a pervasive practice at Chipotle.

Unfortunately, many employers engage in wage theft in order to keep labor costs low.  Wage theft can take many forms such as requiring employees to work off the clock, refusing to pay time-and-a-half for all overtime worked, and improperly paying the same weekly salary to non-exempt employees even when they work overtime.  These practices are called wage theft because they involve the employers keeping wages that employees earned and are legally entitled to receive.

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The New York Attorney General recently filed a lawsuit against Domino’s Pizza, Inc. for wage theft.  This lawsuit is noteworthy for many reasons but perhaps the most noteworthy is that Domino’s argues that it does not employ the workers whose wages were allegedly stolen.  Instead, Domino’s claims that its franchise operators, who contract with Dominos, employ the workers.  The New York Attorney General maintains that Domino’s and the franchises jointly employed the workers and, thus, Domino’s is responsible for the wage theft.

One of the reasons corporations like Domino’s use a franchise business model is to limit the liability of the corporation.  This is perfectly legitimate if done correctly but the New York Attorney General argues that Domino’s exercised so much control over its franchises’ employees that Domino’s was also the employer of the workers and, as such, it is responsible for the alleged wage theft.  A statement from the New York Attorney General’s Office claims that their “investigation found, [Domino’s] played a role in the hiring, firing, and discipline of workers; pushed an anti-union position on franchisees; and closely monitored employee job performance through onsite and electronic reviews.”

“At some point, a company has to take responsibility for its actions and for its workers’ well-being. We’ve found rampant wage violations at Domino’s franchise stores. And, as our suit alleges, we’ve discovered that Domino’s headquarters was intensely involved in store operations, and even caused many of these violations,” said the New York Attorney General.  “Under these circumstances, New York law – as well as basic human decency – holds Domino’s responsible for the alleged mistreatment of the workers who make and deliver the company’s pizza. Domino’s can, and must, fix this problem.”

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The U.S. Department of Labor recently enacted new regulations that will increase the number of workers eligible to receive overtime pay when they work more than 40 hours in a week.  Under the new regulations, among other changes, employees that earn less than $47,476 per year must receive overtime pay—under the old regulations that threshold was $23,660.  Some opponents to this change are arguing that employers will decrease flexible work options in response to the overtime expansion.  Supporters of the change argue that there is no reason why employers would need to decrease flexible work options.  What is perhaps more interesting than this debate, however, is whether “flexible work options” are all their cracked up to be for many workers.

Opponents of the new regulations believe that employers will now need to keep better track of the amount of time that their previously overtime-exempt (now non-exempt) employees work.  This is because employers will have to pay more of their employees overtime pay if the employees work more than 40 hours in a week.  Thus, the argument goes, employers will insist on traditional time tracking practices like requiring workers to clock-in-and-out at a physical work location at the same times every day.

Proponents of the new regulations retort that current technologies and modern workplace policies permit employers to keep track of their employees’ hours without any need to reduce flexible work options.  For instance, some workers can telework remotely on laptops and clock-in-and-out at home.

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This fall, Mainers will get to vote on whether to increase the state’s minimum wage which currently stands at $7.50/hour.  Depending on how Mainers vote, the minimum wage could increase over a period of time to $12/hour in 2020.  In cities and states around the nation, similar minimum wage increases are being debated and passed.  Today, the legislature of the largest state in the nation, California, passed a law that will raise California’s minimum wage to $15/hour over the next six years.

Those fighting to raise the minimum wage, including the Maine People’s Alliance, focus on economic fairness arguments.  “It’s not right that a single mother of two can work full time and still not make ends meet for her family,” says the Maine People’s Alliance.  This argument certainly seems to be resonating around the country as states and cities raise the minimum wage.

Opponents to minimum wage increases often argue that increasing wages will hurt workers because employers will hire fewer people if they have to pay them more and employers will have to lay off workers because of increased labor costs.  Economists have debated this point for decades.  Studies have shown that minimum wage increases do not harm workers and businesses like opponents claim.  When employers face mandates to increase wages, they can often absorb increased labor costs because of increased productivity from workers who are motivated to work longer and harder due to higher wages.  Increased wages also tend to decrease employee turnover which is another boost to productivity.  Furthermore, when the minimum wage increases, low-wage workers can afford to pay more for goods and services which means that employers can increase prices in order to bring in the additional money needed to pay the increased minimum wage.

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Many employers in Maine and around the country jointly employ workers.  For example, the relationships between staffing companies and their clients are often designed so that the staffing company and the client jointly employ the workers who perform work for the client.  In these situations, there are special rules for determining how jointly employed workers become eligible for leave under the federal Family Medical Leave Act (FMLA), and the companion Maine family medical leave law, as well as for overtime pay under the federal Fair Labor Standards Act (FLSA) and the companion Maine overtime law.

The U.S. Department of Labor recently published new FMLA guidance to help employers and workers determine what their obligations and rights are when there is a joint employment relationship. For example, employers with fewer than 50 employees normally do not have to provide FMLA leave to their employees.  However, if two employers jointly employ workers, both employers must count the jointly employed workers for purposes of determining whether they have 50 employees.  If these jointly employed workers push the employers over the 50 employee threshold, they will have to provide FMLA leave to their employees when the employees become eligible for FMLA leave.

Another scenario where joint employment sometimes occurs is when a worker performs work for two companies that are owned and managed by the same people.  For example, a nurse could work for two nursing homes in the same week putting in 25 hours at each nursing home.  If those nursing homes jointly employ the nurse because, for example, the same people own and manage the nursing homes, that nurse is entitled to overtime pay because she worked 50 hours that week.  The U.S. Department of Labor also recently issued guidance on the FLSA to help employers and workers determine whether joint employment exists for purposes of, for instance, determining eligibility for overtime pay.

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This week the First Circuit Court of Appeals, whose decisions govern Maine and other New England states, held that a reasonable jury could determine that two Dunkin Donuts store managers should have received overtime pay. The Fair Labor Standards Act (FLSA), a federal law, entitles employees to overtime pay equal to time-and-a-half of their hourly rate of pay unless the employees fit into one or more exemptions in the law. One of these exemptions is for “executive” employees and the stores’ attorneys argued that the store managers fit under this exemption. The First Circuit rejected this argument and held that a jury would have to decide whether the store managers were exempt “executive” employees.

To avoid paying overtime under the “executive” exemption, an employer must prove the following: (1) the employee’s salary is at least $455 per week, (2) the employee’s “primary duty” is management, (3) the employee “customarily and regularly directs the work of two or more other employees,” and (4) the employee “has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” The First Circuit’s decision in this case turned on the issue of whether the store managers’ “primary duty” was management.

The First Circuit held that a jury could reasonably find that the store managers’ primary duties were not management. The First Circuit noted evidence that the store managers’ spent the bulk of their time performing non-managerial work like serving customers and cleaning. The court held that a reasonable jury could find that the performance of this non-managerial work was equally important to the success of the store as the performance of managerial work.

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This week California enacted the California Fair Pay Act. The California Fair Pay Act will enhance existing laws designed to lessen the pay gap between men and women. “Sixty-six years after passage of the California Equal Pay Act, many women still earn less money than men doing the same or similar work,” said California Governor Jerry Brown. “This bill is another step toward closing the persistent wage gap between men and women.”

Nationally, women earn, on average, $0.78 for every $1.00 that men earn. That difference is slightly better in California where, on average, women earn $0.84 for every $1.00 that men earn. This pay gap has existed for decades across the nation. The California Fair Pay Act has some provisions that may help to decrease the pay gap in California because the law addresses some of the bigger problems with the existing federal Equal Pay Act. As discussed below, Maine’s equal pay law is also better than the federal Equal Pay Act but, in some respects, it is not as strong as the new California Fair Pay Act.

The same “establishment”

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The case of Cossart v. United Excel Corp. involves facts that are becoming more and more common these days because of technological advances that make remote workplaces more affordable and easier to use. Mr. Cossart first entered into an employment contract with United Excel in 2010. United Excel is a design/build company that provides architectural and construction management services to hospitals. Mr. Cossart worked for United Excel as a salesperson. United Excel established a sales office for Mr. Cossart in his home state of Massachusetts. United Excel provided Mr. Cossart with a phone, computer, printer, and videoconference equipment.

In 2013, in connection with his employment with United Excel, Mr. Cossart negotiated a deal with a California hospital. He negotiated the deal from his Massachusetts office and also in California. Under the terms of the employment contract that Mr. Cossart had with United Excel at the time, Mr. Cossart would have been owed a commission once the deal with the California hospital became finalized. When finalization of the deal was imminent, Mr. Cossart informed the President of United Excel, Ky Hornbaker, that he would expect United Excel to pay him a commission of $219,000 once the deal was finalized. According to Mr. Cossart, Mr. Hornbaker balked at paying a commission that high and insisted that Mr. Cossart accept a commission of $62,000. When Mr. Cossart refused to back down, Mr. Hornbaker allegedly scuttled the deal with the California hospital and, consequently, Mr. Cossart received no commission for his work in negotiating the deal. Mr. Hornbaker then also fired Mr. Cossart.

The legal issue that the First Circuit considered in this case was whether Mr. Cossart, an employee who worked in Massachusetts, could sue United Excel, a Kansas company, in Massachusetts. United Excel argued that it did not have sufficient ties to Massachusetts for the Massachusetts courts to have jurisdiction, or authority, over it. The First Circuit rejected United Excel’s argument and held that Massachusetts courts could exercise jurisdiction over United Excel for the purposes of Mr. Cossart’s lawsuit against it.

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Earlier this week, the U.S. Second Circuit Court of Appeals held that employees of the State of Vermont could not sue Vermont for violations of the employees’ rights under the Fair Labor Standards Act (FLSA). FLSA is a federal law that requires, among other things, employers to pay non-exempt employees overtime pay.

The case against Vermont centered around whether the employees were exempt from overtime pay requirements. It was undisputed that the Vermont employees would be entitled to overtime pay if they were not paid on a “salary basis.” Under federal regulations, an employee is generally considered to be paid on a salary basis only if her pay “is not subject to reduction because of variations in the quality or quantity of the work performed.” The Vermont employees argued that Vermont could not satisfy this standard because, among other reasons, their pay fluctuated based on the amount of time they worked.

The Court held, and Vermont did not dispute, that Vermont must comply with the overtime requirements of FLSA. However, the court held that employees of Vermont could not enforce their rights in court because Vermont, as a state, enjoys “sovereign immunity” from employees’ FLSA lawsuits even when Vermont has violated their rights.

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This week a court in California ruled against the car ride service provider Uber in a class action regarding its classification of drivers as independent contractors.  Some Uber drivers filed the class action because they believe Uber should have classified them as employees, which would entitle them to benefits such as expenses they incurred while discharging their duties and more of the tips that customers paid for the drivers’ services.  In the court’s order, it certified the class and, thus, held that the case could proceed as a class action.

The attorneys representing the class of drivers originally wanted to bring the case as a nationwide class action.  However, the court limited the case to just drivers in California.  The class was also limited by Uber’s practice of asking drivers to agree to arbitration agreements that prohibit them from participating in a class action.  Uber drivers in California began to agree to those arbitration agreements in June 2014.  So, California Uber drivers who have driven for Uber since June 2014 and did not opt-out of the arbitration agreement are not part of the class.  Those drivers would need to bring their own claims in arbitration.  The firm representing the class, however, is also offering to represent these drivers in arbitration.

One of the lawyers representing the class of drivers, Shannon Liss-Riordan, said that the class certification order “will allow thousands of Uber drivers to participate in this case to challenge their misclassifications as independent contractors, as well as to attempt to recover the tips that Uber advertised to customers are included in the fare, but are not in fact distributed to the drivers.”