The Legal Line

Ninth Circuit Holds McDonald’s Not Liable for Wage and Hour Violations of its Franchisee because It Did not control Franchisee’s Employees.

posted Oct 4, 2019, 5:35 AM by Christopher Vrountas

On October 1, 2019. the 9th Circuit affirmed summary judgment in favor of McDonald’s, the franchisor, stating that the company did not control the franchisee enough to be liable for the wage and hour claims brought by the franchisee’s employees.  While it is under California law, it is significant as the concepts are similar.  See Guadalupe Salazar, et. al. v. McDonald’s Corp., et. al.

Simply put, even though the franchisee used (on a voluntary basis) the franchisor’s suggested HR computer system, and even though the computer system caused a number of wage and hour violations, and even thought McDonald’s exercised quality control and brand control over the franchisee, including uniform requirements, the 9th Circuit agreed with the District Court that these facts were not enough to hold McDonald’s, as the franchisor, liable for the wage and hour violations of its franchisee.  The Court relied heavily on the fact that the franchisee selected, interviewed, and hired its own employees, that it trained its own employees, that it set wages for its own employees and paid them from its own bank account, that it supervised, set schedules and monitored the time entries of its employees, and that it disciplined and fired its own employees.  Given all that, the Court found McDonald’s did not sufficiently control the franchisee to become an “employer” or a “joint employer” under the California Labor Code. 

Notably, the Court came to this conclusion notwithstanding McDonald’s significant involvement in quality control, branding and even in training to the extent permitted by the franchisee, and the Court rejected the theory that the franchisor should be liable merely because it “could have” stopped the wage and hour violation.  In the end, the opinion and the result came down to the right, or lack thereof, of the franchisor to control the franchisee’s employees in their daily work.

So, even though it comes from California law, it should serve as a good general road map on how franchisors can avoid becoming liable for the wage and hour violations of their franchisees.  Of course, federal law and the laws of the various states where one does business will ultimately control, but again, this approach would be worth considering when developing guidelines for dealing with franchisees in any organization.


DOL Issues Final Rule to Increase the Salary Basis Test for determining Exempt Status

posted Oct 3, 2019, 6:41 PM by Christopher Vrountas

On September 24, 2019, the United States Department of Labor announced its Final Rule to change the salary basis test, which is an integral test used by the DOL to determine whether certain employees shall be considered “exempt” from the protections of the Fair Labor Standards Act concerning minimum wage and overtime pay. 

Briefly, in order for an employee to be considered “exempt” from the protections of the FLSA, that employee must now receive an annual salary of no less than $35,568, or $684 weekly (up from $455 weekly). Only employees working certain kinds of jobs can be considered for exempt status, regardless of salary, including such workers who are primarily executives, professionals, administrators, outside sales people, and others whose jobs primarily involve defined “exempt duties”.  

That said, there is a hybrid exemption that allows employers to treat a “highly compensated employee” as exempt from the protections of the FLSA so long as such employee has at least some “exempt” duties and is paid at a certain benchmark.  The new Final Rule increases this benchmark to a salary level af at least $107,432 annually (up from $100,000 annually). 

There are other changes too which you can see in the DOL’s announcement.  While these changes are significant, they represent essentially half the increases the Obama Administration sought approximately 3 years ago.  These regulations take effect January 1, 2020.

You Can Swipe Right for Cooks and Other Help Now, But Will They Be There in the Morning?

posted Sep 9, 2019, 9:04 AM by Christopher Vrountas

Another Labor Day has passed, but don’t let new developments in the market for labor pass you by without notice. The New York Times recently reported that apps such as Pared and Instawork are the latest inroads the gig economy has made into the restaurant industry. Briefly, these apps are helping restaurants fill gaps in their workforce during the current labor shortage, and they are apparently helping workers such as servers, cooks and other kitchen help find more opportunities beyond the single job for any one restaurant. Think Uber for restaurant labor.

Both these apps were founded in San Francisco in 2015 and workers have since then boasted of higher salaries and greater opportunities while restaurants have expressed relief that their labor needs can be met flexibly and on a real time basis. Pared reportedly has 100,000 people signed up on its platform while Instawork reportedly has nearly 500,000 people. Pared is now in the San Francisco Bay Area and New York, and it plans to expand to Boston, Philadelphia and Washington, D.C. soon. Instagram operates in several U.S. markets including San Francisco, Chicago, Los Angeles, San Diego, Phoenix and is also growing.

While much potential exists with these apps, everybody should check the fine print. From a legal perspective, these apps present important questions, among other things, about who serves as the worker’s employer. You want to be sure that the worker is being correctly treated for tax and worker compensation purposes as well as for all the other employee-based workers’s rights and safety net laws that protect employees in the workplace. And, you want to be clear who has the duty to ensure these obligations are being met.

From a relationship perspective, these apps may undermine loyalty on both sides as employers may not invest in employee training and development as much as otherwise and workers may not invest time to get to know any particular business or to grow with any particular organization or clientele.
While needs do need to be met in the short term, the quick fix should not distract either restaurants or the labor force from the long term benefits of commitment to a business or organization. Relationships are the basis of all business and the success of any organization, and swiping right alone does not a relationship make.

Here’s a link to the article in the New York Times —>

New Hampshire Passes New Law Concerning Youth Employment and EEOC Pay Data Is Due Soon

posted Aug 26, 2019, 12:10 PM by Allison Ayer

There have been some recent developments in state and federal law that may affect employers in New Hampshire set forth below:   

               New Hampshire Amends Youth Night Work Statute

Employers in New Hampshire should be aware that the legislature just recently passed amendments to the laws concerning youth night work.  Effective July 14, 2019, the new R.S.A. 276:13 provides that any youth that is part of an employer’s workforce who works more than twice during a week past 8 p.m. or before 6 a.m. cannot work more than 8 hours in any shift during that particular week.  According to the NH DOL, this new law pertains to youth 16 or 17 years old.  The law is more restrictive for younger workers.  Under RSA 276-A: 4, IV, no youth under 16 years of age shall work earlier than 7 o'clock a.m. or later than 9 o'clock p.m.

Be aware that the new statute is different from the old R.S.A. 276-A:13, which has been repealed.  The old law merely prohibited youths from being “permitted to work at night…more than 8 hours in any 24 hours nor more than 48 hours during the week” and defined “night work” for youths as being “permitted to work more than 2 nights each week, for any time between the hours of 8 o'clock p.m. and 6 o'clock a.m. of the day following.”    

Given the new law, New Hampshire employers should take a close look at their scheduling practices and make sure that any youth employee who works more than 2 times in a week does not get scheduled or does not work any shift longer than 8 hours during that same week.  To put it simply, all shifts worked must be 8 hours or less in any week in which the youth employee works more than 2 times between the hours of 8 p.m. and 6 a.m. 

Employers should keep in mind that, for purposes of determining compliance with this law, the workweek generally is not the employer’s designated workweek but rather the 7-day period running Sunday through Saturday (unless otherwise noted in the statute).  See RSA 276-A:4,VI.  For more information, employers can visit the DOL website announcing the new amendment.  

Don’t miss the September 30 Deadline to Submit Pay Data to the EEOC

Employers with 100 or more employees should also be aware that, as a result of a Federal Court ruling this past Spring, they must submit to the Equal Employment Opportunity Commission their pay information about employees (sometimes referred to as Component 2 data), by race, ethnicity and sex, by September 30, 2019. 


This requirement has been the subject of contention as the current administration has tried, so far in vain, to turn back the actions of the prior administration in this area.  As the fight continues in court, the deadline stands.  Whether the requirement changes again in the future remains to be seen. 


For those who are interested, here’s the back story:  Originally, large and mid-size employers were required to submit information about the number of employees in each job category by race, ethnicity and sex (Component 1 data) to the EEOC by May 31.  This reporting requirements expanded to include hours worked and pay information (Component 2 data), and the deadline was extended accordingly.  The Obama administration’s revision to the EEO-1 form requires employers to report wage information from Box 1 of the W-2 form and total hours worked for all employees by race, ethnicity and sex within 12 proposed pay bands.  But it was the addition of this Component 2 data that became the subject of legal battles, that until recently left ambiguous when and if employers would be required to comply with these Obama-era revisions.


The fight started when the EEOC under the Trump administration stayed these pay-data provisions in 2017.  The National Women’s Law Center challenged the Trump EEOC’s suspension of the pay-data collection provisions and on March 4, 2019, a federal judge lifted the EEOC’s stay, effectively ruling that the EEOC must start collecting the Component 2 information. See National Women's Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (D.D.C.).   On May 3, 2019, the Department of Justice filed a Notice of Appeal in the above case.  But the EEOC further notes that the filing of “this Notice of Appeal does not stay the district court orders or alter EEO-1 filers' obligations to submit Component 2 data.” 


Thus, as of now, according to the EEOC’s website, EEO-1 filers should submit Component 2 data for calendar year 2017, in addition to data for calendar year 2018, by September 30, 2019, as Ordered by the court's recent decision in National Women's Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (D.D.C.).  The URL for the portal set up by the EEOC to submit this information can be found at:   








SCOTUS says Title VII’s EEOC Filing Requirement is NOT Jurisdictional and Objection is Waived if not Timely Raised

posted Jun 12, 2019, 6:45 AM by Allison Ayer

    Title VII’s requirement that an employee must file a charge of discrimination with the Equal Employment Opportunity Commission before he or she may file a lawsuit in court is a “claims processing” rule and not a “jurisdictional” rule says the Supreme Court of the United States. In a case called Fort Bend County Texas v. Davis, the Court explained that while the rule requiring the employee to file first with the EEOC is mandatory, the failure to make such an initial filing before suing in court will not prohibit the employee from pursuing his or her case if the defendant fails to raise an objection about that failure in a timely manner.  Here is what happened. 

    Lois Davis was an IT employee in Fort Bend County, Texas.  In 2010, she informed the human resources department that the director of IT, a man named Charles Cook, was sexually harassing her.  Cook resigned.  But according to Davis’s allegations, her supervisor, Kenneth Ford, who was an acquaintance of Cook, retaliated against Davis for reporting the sexual harassment by cutting her work duties.

    Title VII requires employees to first file an administrative action alleging employment discrimination in the EEOC (or a state agency with a work-sharing agreement with the EEOC) as a precondition to filing a Title VII civil action in Court.  Consistent with this requirement, Davis filed a charge of discrimination with the EEOC in March 2011 alleging sexual harassment and retaliation. 

    But while the EEOC charge was pending, Davis experienced additional work issues which supported a religious discrimination claim.  Davis was told to report to work on an upcoming Sunday.  She told her supervisor, Kenneth Ford, that she could not do so because of a commitment at church, and she offered to arrange for another employee to cover the shift.  Ford told Davis that if she did not show up for the Sunday shift, she would be fired.  Davis did not report to work, attending her church event instead, and she was fired. 

    After her termination, Davis filled out an EEOC intake questionnaire where she handwrote the word “religion” in the “Employment Harms or Actions” section, and she also checked the boxes for “discharge” and “reasonable accommodation” on that form.  But Davis never filed a new Charge of Discrimination amended the original formal charge to explicitly add a religious discrimination claim. 

    In January 2012, Davis filed a civil action in Texas Federal court after she received a notice of right to sue from the EEOC.  The civil action alleged, among other things, a claim for religious discrimination.  Importantly, Fort Bend, Davis’s employer, failed to object to the religious discrimination claim until years later.  In 2016, the employer asserted for the first time that the court lacked jurisdiction to decide Davis’s religious discrimination claim because she had not stated such a claim in the actual charge of discrimination filed at the EEOC. 

    If the EEOC filing requirement were a jurisdictional rule, then a challenge for failing to comply could be raised at any time by the defendant.  A court could even raise the issue on its own at any time. This is because matters of jurisdiction go to the fundamental question about whether a court has power  to hear or make a ruling on the case at issue.  This is why a jurisdictional issue cannot be waived. 

    By contrast, a mere “claim-processing rule” only requires parties to take certain procedural steps at certain specified times.  While these steps may be mandatory, an objection for failing to comply with such a rule or to take such required steps may be waived, or forfeited, if the defending party waits too long to raise an objection. 

    SCOTUS has now removed any ambiguity on the matter.  In this case, it decided that the EEOC filing requirement is a mandatory claims-processing rule, not a jurisdictional one.  As such, the employer in this case waived the right to object on the grounds that Davis failed to file the religious discrimination claim by waiting too long to raise the issue.  Davis’s religious discrimination claim therefore was allowed to proceed notwithstanding Davis’s failure to formally include the theory in her charge.

    Given this decision, employers must carefully review any civil action alleging employment discrimination to evaluate whether it asserts any claim not brought in the EEOC or comparable state agency.  If it does, employers must somehow raise the objection at the first opportunity or risk losing the defense in the litigation.   

DOL Issues Proposed New Rule on Overtime Salary Basis Test and Highly Compensated Employees

posted Apr 23, 2019, 7:27 AM by Allison Ayer

Several years after efforts stalled under President Obama, the United States Department of Labor has now proposed new regulations increasing the “salary test” for determining which employees may be “exempt” from the benefits of overtime pay under the Fair Labor Standards Act. 

Under current federal law, all employees must be paid overtime if they work more than 40 hours per week unless they are “exempt” from overtime pay requirements under the FLSA.  To determine who may be “exempt”, one must apply both a “duties test” and a “salary test”.  The “duties test” has been relatively unchanged for years (to allow bona fide executives, professionals, administrative, outside sales and other employees to be exempted from FLSA protections). The “salary test” has been the subject of substantial debate, as the salary level to determine exempt status under the “salary test” has not changed since 2004.  Currently, employees with a salary equaling $455 per week ($23,660 annually) or more, assuming they also have duties that match those described under the FLSA’s “duties test”, are “exempt” from the requirements for overtime pay under the FLSA.   

On March 7, 2019, the DOL issued a Notice of Proposed Rulemaking, which proposes to increase the annual salary level for the “salary test” to determine whether an employee may be exempt from overtime protection under the FLSA.  According to the Fact Sheet, the annual exempt salary level will be increased to $679 per week, which is the equivalent of $35,308 per year.  The proposed rule does NOT change the “duties test” for determining what type of worker may be exempt from the overtime requirements under the FLSA. 

You may recall that the Obama administration put in place new regulations increasing this salary threshold to $47,476 annually, but those changes were blocked by a federal judge in November 2016.  At that time, the DOL estimated that the new rules would extend overtime eligibility to approximately 4.2 million new employees.  Under the newly-proposed rule, the DOL estimates that it would extend overtime eligibility to more than a million employees.  

Whether intended or not, the newly-proposed salary increase is almost exactly one-half the size of the increase proposed by the Obama administration.  Before it becomes effective, the new rule must proceed through a notice and comment period prior to the DOL finalizing the rule.  Only then may the DOL set an effective date for its enforcement.  

The proposed rule also increases the total annual compensation requirement to exempt “highly compensated employees” to $147,414 annually, up from the current level of $100,000 annually for such employees.      

Employers should monitor developments with the DOL’s proposed Rule.  They may also wish to reach out to industry groups and/or legal counsel to consider the need for and substance of public comment.  The Rules for submission can be found here.   

Here We Go Again - DOL Issues New Guidance on When to Use the Tip Credit Rate

posted Apr 23, 2019, 6:55 AM by Allison Ayer   [ updated Apr 23, 2019, 7:21 AM ]

The United States Department of Labor has made its next move in the continuing policy battle concerning when restaurants can pay service employees the tip credit wage.   While at first glance this may seem like a positive change for the restaurant industry, it remains unclear whether the Courts will give the new guidance deference.  As a result, there is continuing confusion about when and how to pay tipped employees sub-minimum wage.  Here is the latest:    

Where did we leave off? You may recall from prior blog posts, that the DOL previously issued an Opinion Letter which purported to change prior DOL Guidance by eliminating the longstanding 20% Rule for how much time during a workweek that a tipped employee may perform side work while getting  paid the tip credit  wage.  The Opinion Letter also purported to redefine what duties may constitute appropriate side work by, among other things, setting out a more expansive scope of duties for acceptable side work than what the courts and the DOL had previously allowed.  

On February 15, 2019, the DOL announced that it had issued new Guidance concerning the application of the tip credit wage for tipped employees.  The new Guidance adopts virtually wholesale the rules set forth in the prior Opinion Letter. 

This means that whereas for decades prior DOL Guidance provided that tipped employees could be paid the tip credit wage while performing non-tipped duties only if those duties were “incidental” to service, “generally assigned” to tipped employees, and took up no more than more than 20% of a tipped employee’s work time during the week, under this new DOL scheme, an employer would not, under the new Guidance, be prohibited from taking a tip credit based on the amount of time an employee spends performing duties related to a tip-producing occupation.  Rather, the new Guidance would expressly permit employers to take a tip credit for any amount of time that an employee spends on related, non-tipped duties and regardless of whether they involve direct customer service, so long as they are performed contemporaneously with the tipped duties—or for a reasonable time immediately before or after performing the tipped duties. 

What are the specifics under the New Guidance? The new DOL scheme further provides that the duties listed as “core” or “supplemental” in the “Tasks” section of the “Details” tab in the Occupational Information Network (“O*NET”) for waiters and waitresses, will be considered related to a tipped occupation.  Those tasks include:

·        Take orders from patrons for food or beverages. 

·        Check with customers to ensure that they are enjoying their meals and take action to correct any problems. 

·        Check patrons' identification to ensure that they meet minimum age requirements for consumption of alcoholic beverages. 

·        Collect payments from customers. 

·        Write patrons' food orders on order slips, memorize orders, or enter orders into computers for transmittal to kitchen staff. 

·        Prepare checks that itemize and total meal costs and sales taxes. 

·        Present menus to patrons and answer questions about menu items, making recommendations upon request. 

·        Remove dishes and glasses from tables or counters and take them to kitchen for cleaning. 

·        Serve food or beverages to patrons, and prepare or serve specialty dishes at tables as required. 

·        Clean tables or counters after patrons have finished dining. 

·        Prepare tables for meals, including setting up items such as linens, silverware, and glassware. 

·        Explain how various menu items are prepared, describing ingredients and cooking methods. 

·        Assist host or hostess by answering phones to take reservations or to-go orders, and by greeting, seating, and thanking guests. 

·        Escort customers to their tables. 

·        Perform cleaning duties, such as sweeping and mopping floors, vacuuming carpet, tidying up server station, taking out trash, or checking and cleaning bathroom. 

·        Inform customers of daily specials. 

·        Prepare hot, cold, and mixed drinks for patrons, and chill bottles of wine. 

·        Roll silverware, set up food stations, or set up dining areas to prepare for the next shift or for large parties. 

·        Stock service areas with supplies such as coffee, food, tableware, and linens. 

·        Bring wine selections to tables with appropriate glasses, and pour the wines for customers. 

·        Fill salt, pepper, sugar, cream, condiment, and napkin containers. 

·        Describe and recommend wines to customers. 

·        Perform food preparation duties such as preparing salads, appetizers, and cold dishes, portioning desserts, and brewing coffee. 

·        Provide guests with information about local areas, including giving directions. 

·        Garnish and decorate dishes in preparation for serving.

A word of caution before any restaurant decides to change its practices based on this new DOL Guidance. If the Guidance sticks, an employer may take a tip credit for any amount of time a server who is a tipped employee spends performing these related duties.  If the duties are outside this list, they must be paid at the full minimum wage, unless the time spent in the task is de minimis.  Employers remain prohibited from keeping tips received by their employees, regardless of whether the employer takes a tip credit under the Fair Labor Standards Act.

However (and it is a BIG however), as we have discussed in greater detail in prior articles, the Federal courts who have recently (albeit prior to the recent new Guidance issued on February 15, 2019) decided cases concerning the application of the tip credit wage have indicated an inclination to reject the new guidance in favor of the prior 20% Rule.  One Court upheld the 20% Rule, finding that it had the force of law and would be enforced by the courts in part due to the over 30-year history of the DOL applying such rule consistently without challenge (Alec Marsh v. J. Alexander’s) and another rejected the DOL’s new standard set forth in its 2018 Opinion Letter for applying the tip credit and refusing to enforce it because the DOL issued the Opinion Letter hurriedly and without the necessary process required for changing longstanding legal precedent relied on by potential parties (Cope et al. v. Let’s Eat Out, Inc.).  Whether such reasoning would apply to the new Guidance issued last month remains to be seen.

Where does this Leave Restaurant Employers?  Unfortunately for restaurants, the applicable rule for determining what rate to pay tipped employees remains up in the air.  While there is new, beneficial DOL Guidance that says employees may spend any amount of time on the listed duties performed contemporaneously with the tipped duties or for a reasonable time immediately before or after performing the tipped duties, there are federal court decisions that reject this scheme, at least when it was initially suggested in the DOL’s Opinion Letter of 2018.  While it remains unclear how other federal courts will decide on these matters going forward under the new Guidance, future plaintiffs are likely to rely on Cope and Alec Marsh to try to convince other jurisdictions to apply the 20% Rule as opposed to the standard set forth in the DOL’s new Guidance.  Moreover, even the new Guidance contains ambiguity.  For example, there is the issue of what constitutes a “reasonable amount of time before and after direct service to customers to perform these duties remains.”  This new standard has simply not been tested yet in the courts. 

Restaurants must keep in mind that federal law is both uncertain and rapidly changing.  The issuance of a new DOL Guidance does not immediately change what courts will consider to be reasonable.  Indeed, the Courts, and not the DOL, are the final arbiters of federal law.  Thus, even if shorter or longer times performing tasks before serving customers may be considered “reasonable,” continuing to abide by the 20% Rule may well give employers an additional defense to such claims.  At this point, employers may decide to comply with both Guidance schemes to avoid challenges from the DOL on the one hand or plaintiffs’ lawyers on the other hand.  Thus, while it might not have been the intent, the DOL’s action increases complexity rather than simplicity.

Moreover, restaurants should be aware that they must also comply with the state’s minimum wage statutes and regulations, including the rules concerning the tip credit.  Please keep in mind that this article is provided for information purposes only and is not advice, and businesses should always raise their questions or concerns with their legal counsel about paying employee wages in compliance with federal law.  

Don’t Delay with the FMLA: DOL Says Time Off must be Designated as FMLA Leave Even if Other Paid Time Off Benefits are Used

posted Apr 10, 2019, 4:12 PM by Allison Ayer

The Department of Labor recently issued an opinion letter concerning leave under the Family and Medical Act (“FMLA”).  DOL now opines that an employer must designate employee as FMLA leave if such time off has been requested for an FMLA qualifying event, even if the employee uses other paid time off benefits during this time.  The DOL also opined that employers cannot designate more than 12 weeks as FMLA leave.  This means, among other things, that an employer cannot delay its FMLA designation during the period when the  employee maybe applying his or her accrued paid time off.  Here is the DOL opinion in greater detail:

The opinion letter describes a practice where employers permit employees to use some or all available paid sick or other earned paid time off (see 29 C.F.R. §825.700), but do NOT designate such paid time off as FMLA leave even though it has been taken for an FMLA qualifying reason, i.e. it has been used for one’s own serious health condition, a pregnancy or adoption or the care of one’s family member suffering from a serious health condition.  In essence, the opinion letter describes a practice where employers delay designating time off as FMLA leave while employees use their accrued paid time off while they are out of work for an FMLA qualifying reason.  The DOL said that this practice was not permissible. 

Some background may help put this opinion into perspective.  As noted by the DOL, the FMLA and its Regulations provide that eligible employees are entitled to take up to 12 weeks of unpaid, job-protected leave per year for specified family and medical reasons.  Employers must, via written notice,  designate such time off as FMLA leave if it is for a qualifying reason.  See 29 C.F.R.   §825.300(d)(1).  Such notice confirms for both the employer and the employee that the employee’s job must be protected during this statutory leave.  Once an eligible employee communicates sufficient information for an employer to understand that the reason for the leave is FMLA-qualifying, “the qualifying leave is FMLA-protected and counts toward the employee’s FMLA leave entitlement” the employer must designate the leave as FMLA leave within five (5) business days.  See 29 C.F.R. §825.300(d)(1). In that way, it is clear to both the employer and the employee that the employee is statutorily entitled to his or her job back when the employee returns from such designated leave.  The DOL has now expressed its view that the employer cannot delay such notice designation even if both the employer and the employee would prefer to delay designation until after the employee uses other paid time off benefits during leave first. 

At first, the opinion may seem to propound a rule that bans employment policies more generous than the statute, but that is not the point.  Rather, the DOL simply has opined that an employer’s policies cannot alter (i.e., expand) an employee’s statutory rights.  Indeed, such an opinion is really a mere truism, and no different from asserting that private citizens cannot change an Act of Congress.  Private citizens can make contracts and other enforceable promises to each other but they cannot expand or decrease the statutory rights of its employees or business associates merely by making such contracts or promises.

Thus, while employers are free to adopt leave policies that are more generous than those required by the FMLA, employers cannot designate more than 12 weeks of protected leave under the FMLA.  According to the DOL, while an employer must follow its own policies and benefits programs for paid leave time to employees above and beyond the rights provided by the FMLA, such additional benefits “cannot expand the employee’s 12-week…entitlement under the FMLA.”  As such, if an employee applies paid time off during the period of otherwise unpaid FMLA leave, that paid time off must count towards the 12 weeks of FMLA entitlement and protection.  If an employer grants its employees more than 12 weeks of leave pursuant to a paid sick leave or other time off policy more generous than the FMLA, that extended time off beyond 12-weeks would not be FMLA protected, although it may nevertheless be required as a matter of contract or other applicable law.     

What the DOL’s opinion truly calls for is consistency and clarity.  When an employer learns that an employee’s leave is being taken for an FMLA purpose, the employer must designate it as protected leave under the FMLA in a timely fashion.  This ensures that an employee will know he or she will be protected whenever he or she takes leave for an FMLA purpose and it clarifies the obligation of the employer to issue such notice without exception or delay.  This ensures no administrative errors that could otherwise cause delay in the employee’s return which could lead to forfeiture of an employee’s right to return to his or her job.  In short, employers will have no excuse to issue not to issue clear notice to employees about their FMLA rights, and there should be no reason for employers and employees not to know where exactly they stand under the statute.

In light of the DOL’s opinion letter, here is a summary of steps for employers to follow with respect to designating time off as protected FMLA leave:

·        Eligibility NoticeWhen an FMLA eligible employee requests time off, employers should provide an Eligibility Notice AND a Rights and Responsibilities Notice.  The DOL has published a Compliant Form, WH-381.  The response will allow the employer to determine whether the time off can be counted against the 12-week FMLA leave entitlement.

·        Medical Certification.  If the employer is going to require a medical certification, a SEPARATE MEDICAL CERTIFICATION FORM must be provided to the employee at the same time the Eligibility and Rights and Responsibilities Notice is provided.  The DOL has published a compliant medical certification Compliant Form (WH-380-E) to provide with the Eligibility and Rights and Responsibilities Notice. 

·        Designation Notice.  Within five (5) business days of the employer having sufficient information to determine that the employee’s requested leave qualifies as FMLA leave, the employer must provide a Designation Notice, DOL compliant Form WH-382.  In essence, the Designation Notice explains in writing that the employer is going to count time off as FMLA leave against the employee’s 12-week entitlement.  According to the DOL’s latest opinion letter this Designation must be provided within five (5) business days of the employee asking for FMLA-qualifying leave, even if he or she uses other paid time off in conjunction with the FMLA leave.  Further to that point, the Designation Notice must identify the amount of leave that will count against the employee’s FMLA entitlement and state whether the employee is required to substitute paid leave for unpaid FMLA leave.  See 29 C.F.R. 300(d) and 825.301.

·        Fitness for Duty Certification. If the employer is going to require the employee to provide a fitness-for duty certification to return to work, it must tell the employee of this requirement at the same time that it provides the Designation Notice.  If the employer will require the fitness-for-duty certification to specifically address whether the employee can perform the essential functions of the job (which clearly it should to avoid running afoul of the ADA), it must provide a list of the job functions with the designation notice.  Providing a job description with the Designation Notice would satisfy this requirement, so long as the description lists the essential functions.  See 29 C.F.R. 300(d), 825.301, 825.312 and 825.313.  There is a place on the DOL compliant Designation Notice, Form WH-382, for the employer to check off if the fitness-for-duty certification will be required.  Compliant Form WH-382 also has a space to check whether the list of essential functions is included with the designation.    

The above is provided for educational purposes only and is not legal advice.  As always consult with legal counsel, as appropriate, to ensure that all steps are taken to designate time off as FMLA leave and count the time against the 12-week entitlement.  

Employer Incentives for Wellness Programs in Limbo as EEOC Vacates 30% Rule

posted Jan 16, 2019, 9:27 AM by Allison Ayer

As of January 1, 2019, the EEOC removed from federal regulations a rule permitting an employer to incentivize employees to voluntarily disclose information protected by the Americans with Disabilities Act (“ADA”) and Genetic Information Nondiscrimination Acct (“GINA”) in connection with an employee-sponsored wellness program.  This means that employers who offer wellness programs that incentivize employees to disclose medical information are now in legal limbo until the EEOC offers guidance on how employers may obtain relevant information to administer wellness incentive programs without running afoul of the law.  Here is what happened: 

The ADA and GINA are two federal laws which provide a variety of protections for employee health information.  These laws protect against the disclosure of employee health and medical information, and they limit the types of questions an employer can ask about an employee’s medical status and history.  Generally, employers may not compel employees to make disclosures of personal health information.

The law does, however, allow employers to encourage voluntary disclosures of such information to the extent employers do so in the context of administering a wellness incentive plan.  In 2016, the EEOC issued a rule under the ADA and GINA which allowed employers to incentivize employees to disclose medical and health information without running afoul of the ADA and GINA so long as such disclosures were made in connection with an employer-sponsored wellness program and the incentive offered by the employee met EEOC standards.  So long as the incentive offered by employers employees involves a reward of up to a 30% discount of the cost of self-only health insurance coverage, then the incentive would be considered a “voluntary” program rather than an unlawful “involuntary” requirement which would be prohibited by the ADA and GINA.  If the incentive offered by the employer met the 30% limit (and the disclosure was made in connection with a wellness program) under the 2016 EEOC rule, the employee’s disclosure of health information would be considered “voluntary” and compliant with the ADA and GINA. 

After the 2016 EEOC rule went into effect, the American Association of Retired Persons (“AARP”) filed suit against the EEOC in District of Columbia Federal Circuit Court.  The AARP argued that the 30% incentive made the disclosure not merely “voluntary” to the extent there were employees who could not afford to pay the cost of coverage without the incentive.  The AARP argued that employees who could not afford coverage without the 30% incentive discount would have no choice but to disclose ADA and GINA protected health information to the get the discount, effectively rendering the disclosure “involuntary” for the lower compensated workers.  In 2017, the D.C. Circuit Court vacated the 2016 EEOC incentive rule, finding that it was arbitrary and capricious and not supported by adequate evidence, including how the EEOC chose 30% as the limit for an incentive to be voluntary.  Rather than issue a revised rule or explain its prior incentive limits, the EEOC has decided to remove the incentive portion of the ADA regulations.

For 2019 and going forward, this means that employers who offer wellness programs that incentivize employees to disclose medical information are left in a legal limbo until the EEOC offers new guidance as to how large of an incentive employers may use without converting the requested disclosures from voluntary and lawful to involuntary and unlawful.  Among their choices, employers could:

1) follow incentive rules for wellness programs set forth in other laws, for example the Affordable Care Act;

2) eliminate incentives for participation in wellness programs altogether; or

3) define through company policy and practice what is a voluntary disclosure by using self-created incentive limits. 

Each of these options presents risks, the last being perhaps the most prone to legal challenge given the lack of outside guidance.  Given these risks, employers would be well advised to reassess their wellness program incentives for 2019, even if they have not done so in the past.  Employers should strongly consider consulting with legal counsel and/or group health insurance providers and agents as part of that process.   Employers should also keep in mind that they must continue to comply with the other EEOC regulations concerning disclosure and use of employee medical and health information, as the sections of the federal regulations concerning wellness programs remain in effect.  See 29 C.F.R. §1630.14.  

The Fight Over the 20% Rule Continues as a Federal Court Rejects DOL Opinion Letter

posted Jan 16, 2019, 9:01 AM by Allison Ayer   [ updated Jan 16, 2019, 9:29 AM ]

    It is a new year.  But the same fight continues in the courts over when restaurants can pay service employees the tip credit wage.  As result, there is continuing confusion for the restaurant industry about when and how to pay tipped employees sub-minimum wage.

Just a few months ago, we wrote about a United States Department Of Labor Opinion Letter which purported to change prior DOL Guidance by eliminating the longstanding 20% Rule for how much time during the week a tipped employee may perform side work while getting  paid the tip credit  wage.  The new Opinion Letter also purported to redefine what duties may constitute appropriate side work by, among other things, setting out a more expansive scope of duties for acceptable side work than what the courts and the DOL had previously allowed.   

 Before the DOL Opinion Letter, the 20% Rule had been part of DOL Guidance for decades and had long been given deference by the Courts.  See DOL Guidance, Field Operations Handbook at §30d00(f)(2016).  Briefly, the DOL Guidance provided that tipped employees could be paid the tip credit wage while perform non-tipped duties so long as those duties were “incidental” to service, “generally assigned” to tipped employees, and not so time consuming to take any more than 20% of a tipped employee’s work time during the week.  Just in September 2018, just two months before the DOL issued its new Opinion Letter, the Ninth Circuit in Alec Marsh v. J. Alexander’s ruled that the DOL’s Guidance was a reasonable interpretation of federal law by the DOL that was entitled to deference by the courts.  In other words, the court ruled that the 20% Rule had the force of law and would be enforced by the courts in part due to the over 30-year history of the DOL applying such rule consistently without challenge.  Over that period of time, restaurants across the country had established policies and practices to comply with the 20% Rule and employees also had come to rely on the 20% standard to evaluate whether they were being paid fairly.  Yet, oddly, shortly after the DOL scored such a victory for its own Guidance and its own 20% Rule, it sought to abrogate that standard and issued a new one by fiat through its new Opinion Letter published in November.  For these reasons, we predicted in our prior article that the Opinion Letter and the DOL’s new interpretation of the regulations would be tested in Court.

The new Opinion Letter failed its first test, and the restaurant who sought enforcement of the new DOL standard lost its case in court.  On January 2, 2019, a federal court in the District of Wisconsin rejected the DOL’s new standard for applying the tip credit.  In essence, the Court found the DOL Opinion Letter was issued hurriedly and without the necessary process required for changing longstanding legal precedent relied on by potential parties.  The court ruled that the Opinion Letter was accordingly not entitled to deference and would not be enforced by the Court.  

In Cope et al. v. Let’s Eat Out, Inc. (document attached), the plaintiffs claimed that Buffalo Wild Wings had willfully violated the Fair Labor Standards Act by, among other reasons, paying servers and bartenders sub-minimum, tip-credit rates while performing improper types and excessive amounts of non-tipped work.  In July 2016, the Court conditionally certified an FLSA collective action. This permitted the suit to proceed against the restaurant on behalf of not just the individual plaintiffs but also all current and tipped employees of Defendants’ Buffalo Wild Wings restaurants who were paid subminimum wages during the prior three years.

After the DOL Opinion Letter was issued, Defendants moved to decertify the collective action.  They argued that with regard with regard to the claim that the restaurant had unlawfully paid servers and bartenders the tip credit wage for non-tipped duties and in excess of 20% of their time, the DOL Opinion Letter should be given deference and applied retroactively.  The court denied the restaurant’s motion.

In a strongly worded decision, the federal court held that the DOL Opinion Letter was “unpersuasive” and “unworthy” of judicial deference.  The court noted that the DOL had for over 30 years consistently interpreted its own Regulations as requiring employers not to assign tipped employees to perform non-tip-producing tasks for more than 20% of the hours such employees worked in tipped occupations in a workweek. The court noted that the DOL had even republished Guidance reaffirming the 20% Rule as recently as 2016.  Furthermore, the court found that the Opinion Letter which reversed this long-held Guidance was issued “abruptly” without offering any “reasoning or evidence of any thorough consideration for reversing course” on prior the Guidance that had established the 20% Rule. Finally, the court reasoned that giving judicial deference to an Opinion Letter “pronouncing the sudden forthright withdrawal of such longstanding guidance would result in “’unfair surprise’” to the plaintiffs and the class who brought the lawsuit when the “time-honored” 20% rule interpretation was understood to be the law. 

Where does this Leave Restaurant Employers?  Unfortunately for restaurants, the rule to be applied to determine what rate to pay tipped employees remains uncertain.  There is now a federal court decision that has rejected the Opinion Letter and enforced the prior DOL Guidance that established the 20% Rule.  But this is just one court’s view.  It remains unclear how other federal courts will decide.  With that said, future plaintiffs are likely to rely on Cope to try convince other jurisdictions to reject the Opinion Letter and apply the 20% Rule.     

Given these circumstances, the safer course for employers appears to be to continue to abide by the 20% Rule and restrict time worked before or after serving guests to less than 20% of the workweek until the DOL or the courts further clarify this point. For more than 30 years, the 20% Rule had been the standard and considered reasonable by the DOL and/or the courts.  The issuance of an Opinion Letter does not immediately change what courts will consider to be reasonable.  Thus, even if shorter or longer times performing tasks before serving customers may be considered “reasonable,” abiding by the 20% Rule will likely give employers an additional defense to such claims.

It is possible that the new Opinion Letter may be applied on a going forward basis by another court but not retroactively as requested in Cope, but that is not certain.  It is also possible that the new Opinion Letter may at least provide some defense against claims of “willful violations” of federal law, as at the very least it has caused legitimate confusion as to what the law actually says.

Given the above, restaurants must keep in mind that federal law is both uncertain and rapidly changing.  Moreover, restaurants should be aware that they must also comply with the state’s minimum wage statutes and regulations, including the rules concerning the tip credit.  Please keep in mind that is article is provided for information purposes only and is not advice, and businesses should always raise their questions or concerns about paying employee wages in compliance with federal law with their legal counsel. 


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