Minimum Wage and Overtime Requirements

of the Fair Labor Standards Act and New York Labor Law

By Christopher Marlborough, Esq.

Rapidly Expanding Practice Area

• Federal wage and hour case filings are up 237% over the past decade and 438% since 2000.

• New York and California provides criminal penalties for wage theft.

• State attorneys general and the departments of labor have become increasingly aggressive in their enforcement of existing law.

Sources of Law

• Fair Labor Standards Act of 1938, 29 USC § 201, et seq.

• New York Labor Law• Minimum Wage NYLL § 652• Overtime NYLL § 232• Remedies NYLL §§ 198, 198-a (including criminal penalties)

• New York Wage Orders• Hospitality Industry, 12 NYCRR § 146• Farm Workers, 12 NYCRR § 190 • Miscellaneous Industries, 12 NYCRR § 142 • Not for Profit, 12 NYCRR § 143• Building Service Industry, 12 NYCRR § 141

• Department of Labor regulations and opinions • Do not have the force of law, but can be persuasive

The Fair Labor Standards Act of 1938

• Covers only minimum wage ($7.25) and overtime (time and a half over 40 hours).

• Jurisdictional requirements

• Enterprise Coverage- $500,000 in annual revenue and hospitals, schools (enterprise coverage); or

• Individual Coverage- workers "engaged in commerce or in the production of goods for commerce" and

domestic service workers.

• Two year SOL unless defendants’ conduct is willful in which case three-year SOL applies.

• Failure to post wage and hour posters may result in extension of SOL to six years.

• Opt-In Collective Action procedure

• Notice issued at an early stage (after showing that workers are similarly situated with respect to

plaintiffs’ claims).

• Liquidated damages

• 100% liquidated damages unless defendant can show good faith.

• Attorneys’ fees and costs

The New York Labor LawIn many ways, New York State laws provides much stronger protections than the FLSA

• Overtime exemptions more stringent

• Higher minimum wage ($9.00)

• Additional protections:• Spread of Hours damages for minimum wage and hospitality workers;• Call in pay;• Wage Theft Prevention Act Notification requirements;• Strong protections for tipped workers and lower tip credit; and• Requires timely payment of wages owed which may cover “gap time” claims

• $20 per hour employee worked 42 hours but only paid for 20. NYLL Actual Damages = $460. FLSA damages only $60.

• Six year statute of limitations

• Opt-out class action procedures (Rule 23 in federal court; Rule 9 in NY State court)• Likely to result to result in a class size 10 to 20 times larger than an FLSA opt-in collective action.• Notice issued at a later stage (after satisfying the class certification requirements).

• Liquidated damages • Prior to April 9, 2011- 25% liquidated damages; On or after April 9, 2011- 100% liquidated damages.• Federal courts have award both NY and FLSA liquidated damages.

• Attorneys’ fees and costs

Who is an Employer?

• 29 USC § 203(d) - “Employer includes any person acting directly or indirectly in the interest of an employer in relation to an employee …”

• NY BCL § 630 – provides for individual liability for top ten shareholders of a closely held corporate defendant• Recent legislation would extend the law to members of limited liability

companies

Who is an Employee?

• Why is this important?• Non-Employees are not protected by federal and state minimum wage and

overtime laws.

• Non-Employees are not protected by civil rights and health and safety laws.

• Non-Employees may not collect earning-based Social Security, unemployment or workers’ compensation.

• Management does not have to make Social Security and Medicare contributions for non-employee.

Independent Contractors• Federal Economic Realities Test

• Worker’s services integral to business

• Permanency of relationship

• Worker’s investment in facilities and equipment

• Nature and degree of boss’s control

• Opportunities for profit or loss

• Independence of the worker’s business (degree of skill, judgment, advertising)

• NY Common Law Right to Control Test• Whether worker worked at her own convenience

• Whether worker worked free to engage in other employment

• Whether worker was on employer’s payroll

• Whether worker worked on a fixed schedule

Unpaid InternsThe DOL’s tests to determine whether unpaid interns are employees are extremely narrow

• U.S. DOL Fact Sheet #71• The internship, even though it includes actual operation of the facilities of the employer, is

similar to training which would be given in an educational environment;• The internship experience is for the benefit of the intern; • The intern does not displace regular employees, but works under close supervision of

existing staff;• The employer that provides the training derives no immediate advantage from the activities

of the intern; and on occasion its operations may actually be impeded; • The intern is not necessarily entitled to a job at the conclusion of the internship; and • The employer and the intern understand that the intern is not entitled to wages for the

time spent in the internship.

• New York Department of Labor is even more restrictive• Employer must satisfy each of eleven factors.

• Recent Intern News:• Oct. 2014 – NBC Universal $6.4 million proposed settlement announced• Nov. 2014 - Condé Nast propose $5.8 million settlement announced• Second Circuit considering appeals in Hearst Newspapers and Fox Searchlight intern cases

which could determine the standard in this Circuit.

EXEMPTIONS

• Executive • Professional• Administrative• Outside sales employee• Commissioned sales employee• Computer professionals• Seasonal and recreational

Establishments• Farmers• Switchboard operators• Local newspapers• Motor carriers• Domestic companions

See Section 13 of the FLSA for complete list of exemptions

• Executive• Professional• Administrative• Outside sales employee• Taxicab drivers• Non-profit volunteers• Volunteers at short term recreational

events• Camp counselors

See NYLL § 651(5) for complete list of exemptions

FLSA Exemptions NYLL Exemptions

White Collar exemptions

Executive, Administrative and Professional Exemptions Worker Must Satisfy Both “Primary Duty Test” and

“Salary Test.” Primary duty is the principal, main or most important responsibility.

Weekly Salary

FLSA $455.00

NYLL 2013 $543.75

NYLL 2014 $600.00

NYLL 2015 $656.25

NYLL 2016 $675.00

Primary Duty

Executive Managing the enterprise or part of it. Must direct the work of at least two full time workers and have a role in hiring and firing, promotion or change in status of workers.

Administrative Performance of non-manual work directly related to the management or general business operations, which includes the exercise of discretion and independent judgment in matters of significance.

Professional Work which is intellectual in character requiring consistent exercise of discretion and judgment. Advanced knowledge in a field of science or learning acquired by prolonged intellectual instruction.FLSA- No salary test requirements for doctors and lawyers. NYLL no salary test for professional exemption.

Under the FLSA, highly compensated employees (> $100,000) are exempt if they meet the salary test and “customarily and regularly perform” one of the primary duties of an exempt white collar employee.

Minimum Wage

Non-Tipped

Workers

Food Service

Workers*

Service Employees* Resort Hotel

Workers*

1/1/2011 $7.25 $5.00 $5.65 $4.90

12/31/2013 $8.00 $5.00 $5.65 $4.90

12/31/2014 $8.75 $5.00 $5.65 $4.90

12/31/2015 $9.00 $5.00 $5.65 $4.90

FLSA• 7.25 per hour for non-tipped

employees• $2.13 per hour for qualifying tipped

employees (after applying tip credit)• There has been no increase in the

federal tipped minimum wage since 1991 *for qualifying tipped employees

OVERTIME

NYLL

• Time and one half at the regularly hourly rate for all hours > 40• Second Circuit courts presume salary is for first forty hours, unless there is an agreement to the contrary.

This can have enormous implications for damages calculations (3x or more).

The Tip CreditFLSA and NYLL Allow an Employer to Credit Some Workers’ Tips Against the Employer’s Minimum Wage Obligations

To claim the federal tip credit:• employer must provide notice at time of hiring that employer will apply the tip credit;

• tipped worker must regularly and customarily receive more than $30 per mo. in tips;

• If worker does not receive at least minimum wage including tips, employers must make up the difference; and

• at least 80% of the work performed by tipped workers must relate to direct customer service.

No additional tip credit for overtime hours. Tip credit must be calculated after overtime obligation is factored in.• FLSA- $5.12 tip credit = $2.13 p/hr regular time. Employer must pay $5.76 p/hr OT.

• NYLL (food service workers) $3.75 tip credit = $5.00 p/hr regular time. Employer must pay $9.38 p/hr OT.

Tip Pooling and Tip Sharing: Permissible among direct service employees.

• NYLL- Managers are not permitted to share in the tips.• Barenboim v. Starbucks, 995 N.E. 2d 153 (2013) (NY Court of Appeals held Starbucks shift supervisors with limited. supervisory responsibilities were permitted to

participate in the tip pool).

Tip Appropriation (NY): Labor Law §196-d strictly prohibits employers from appropriating tips intended for employees even if the employer does not take a tip credit. See

also NYCRR § 146-2.18-2.19.

Are “Service Charges” really tips?• Employers must notify customer when delivery service charges do not constitute a tip.

• Employers must clearly and conspicuously notify customers when a service or administrative charge is not a tip. NYLL 196-d.

Additional Wage Related Statutes

• Retaliation. Both the FLSA and NYLL prohibit retaliation against workers who file complaints about unpaid wages.

• Prevailing Wage Laws. Under both Federal and NY Law, certain government contractors are required to pay their workers a “prevailing wage” for work on those contracts.

• WARN Act. Under certain circumstances employers are required to provide sixty days’ notice to employees when it is closing down a worksite.• 2014- Dewey LeBoeuf reached a $4.5 million settlement with its workers in 2014.

• Spread of Hours Pay (NY only). Hospitality and minimum wage workers must receive one extra hour of pay at the minimum wage rate when working more than ten hours in a single workday or working a split shift.

• Call in pay (NY only). When workers are called in to work, under certain circumstances they must be paid for the lesser of four hours or their regularly scheduled shift.

• Wage Theft Prevention Act Notifications (NY Only). Requires employers to provide written notice of pay rates to employees.

Common Mistakes Employers Make• Relying on an employee’s job title to justify an exemption.• Assuming that salaried employees are exempt.• Improper salary deduction from exempt employees, resulting in a loss of the

exemption.• Requiring employees to perform duties off the clock.• Refusing to pay for overtime that was not pre-approved.• Automatic deductions for breaks that the employee does not take.• Private sector employers’ payment of comp time in lieu of an overtime premium. • Failing to consider state law requirements. • Failure to maintain records.• Paying workers off the books or partially off the books.• Replacing employees with unpaid interns.• Paying non-exempt employees on a salaried basis.

Christopher Marlborough, Esq.The Marlborough Law Firm, P.C.

445 Broad Hollow Road, Suite 400

Melville, New York 11747

(212) 991-8960

chris@marlboroughlawfirm.com

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