Minimum Wage and Major League Baseball’s Fair Labor Standards Act Exemption

Posted by on Aug 2, 2016 in FLSA

On June 27, 2016, U.S. Congresswoman Cheri Bustos (D-Ill.) and U.S. Congressman Brett Guthrie (R-Ky.) introduced H.R. 5580, where it was referred to the House Committee on Education and the Workforce, stylized as the “Save America’s Pastime Act.” The bill was intended to amend the Fair Labor Standards Act (“FLSA”) to exempt minor league baseball players from the minimum wage. While Congresswoman Bustos H.R. 5580 quickly withdrew her support after public outcry, the bill is still in committee and serves as an important reminder of how little minor league baseball players are paid and the expansive legal protections afforded to the baseball industry.

As an initial matter, the federal minimum wage is currently $7.25 per hour. While Major League Baseball (“MLB”) profits are booming, currently over $9.5 billion annually, minor league players typically only earn between $1,150 and $2,700 per month, and only during the season. With players often clocking fifty-to-seventy hour weeks, and no overtime pay, a rookie minor league player can earn as little as $4.10 per hour, and a multi-year veteran approximately $13.50 per hour. In contrast, the minimum salary for a major league player is $500,000 per year.

Some minor league players are attempting to strike back at the industry. In Senne, et al. v. Office of the Commissioner of Baseball, et al., 3:14-cv-00608, filed in early 2014, several former baseball players are seeking certification for a nation-wide class-action lawsuit alleging that the minor league baseball system violates the FLSA by denying players a minimum wage and overtime. The case is currently pending before the United States District Court for the Northern District of California. MLB claims minor league players are not bound by the FLSA due to an exemption for seasonal and recreational employers. The previously-proposed H.R. 5580 would specifically clarify and exempt the minor league system from any minimum wage concerns.

Those involved in the baseball industry, as well as those who just love the game of baseball, should be mindful of the status of this bill. Should H.R. 5580, or a similar bill, be signed into law, there will be far-reaching legal consequences. These types of bills tell us what is on the minds of legislators and signals yet another effort to expand the FLSA and to weaken its exceptions. Hill Wallack employment law attorneys are available to help navigate issues such as these and how they may affect clients in New Jersey, New York, and Pennsylvania.

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The District Court of New Jersey Rejects Class Action Certification Under the FLSA

Posted by on May 31, 2016 in FLSA

In a recent case in the United States District Court for the District of New Jersey, a plaintiffs’ motion for final certification of a collective action under the Fair Labor Standards Act was denied. At its core, Plaintiff Fred Adami and two remaining Opt-In Plaintiffs alleged that their employer, Cardo Windows, Inc. mischaracterized them as independent contractors, rather than employees, and asserted claims for unpaid overtime.

Judge Simandle found that while the Plaintiffs properly alleged common employer practices, they failed to sufficiently demonstrate the similarity between the circumstances of their employment. For example, while Adami was a long-time employee that was at the core of Cardo’s operations, the Opt-In Plaintiffs “worked sporadically and had differing work environments from Adami.” Adami v. Cardo Windows, Inc., No. 12-2804 (JBS/JS), 2016 WL 1241798, at *2 (D.N.J. Mar. 30, 2016).

Specifically, Adami and the Opt-In Plaintiffs worked a considerably different number of hours, which changed on an individual basis. Schedules varied based on customer needs, and the Opt-In Plaintiffs could take breaks when they wished. In addition, Defendants noted that the Opt-In Plaintiffs were entitled to hire “helpers” for each project, and were able to choose both the number and how much each were paid, which changed the profit or loss for each Opt-In Plaintiff. Lastly, while Adami worked for Cardo for approximately ten years, the Opt-In Plaintiffs had worked at the company for just a few months. Subsequently, the Court found that while Adami’s employment relationship had been described in significant detail, there was a considerable amount of evidence that showed Adami’s employment was “the exception rather than the rule.” Adami, 2016 WL 1241798, at *6.

In so finding, the Court applied the “circumstances of the whole activity” test to determine whether an employment relationship existed and noted that it is the plaintiff’s burden to show by a preponderance of the evidence that “all members of the class are all employees covered by the FLSA.” Id. (emphasis in original).

Ultimately, Judge Simandle held that the Opt-In Plaintiffs were closer to independent contractors than employees. As such, the circumstances of each Opt-In Plaintiffs’ employment were too dissimilar for a collective action.

Employers should consider the similarity between their employees’ work, and the degree to which the company controls the day-to-day actions of its employees to determine if they are truly employees or independent contractors. Hill Wallack employment law attorneys are available to help navigate these options and how they may affect clients in New Jersey, New York, and Pennsylvania.

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The U.S. Department of Labor Provides New Guidance to Determine When Workers May be Classified as “Independent Contractors”

Posted by on Aug 17, 2015 in FLSA

By: Susan Swatski, Esq. (sswatski@hillwallack.com) and Jessica Seiden, Summer Associate

As workplaces take on organizational restructuring, many employees become misclassified as independent contractors. This misclassification has significant impact on workers, particularly in low wage industries. When employees are wrongly characterized as independent contractors, they do not receive labor protection rights, such as minimum wage, overtime, unemployment, and worker’s compensation. The U.S. Department of Labor’s Wage and Hour Division recently provided additional guidance to aid employers in determining how to classify their workers.

An agreement between an employer and a worker designating the worker as an independent contractor is not indicative of the relationship and is not relevant to the status. The Fair Labor Standards Act (“FLSA”) applies a multi-factor “economic realities test” to determine whether a worker is an employee or an independent contractor. A worker who is dependent upon finding employment in the business of others is considered an “employee,” whereas a worker in business for him or herself is considered an “independent contractor.” The Administrator’s application of the “economic realities” test considers six independent factors, and no factor alone is sufficient to determine if a worker is “economically dependent” on the employer; all of the factors must be considered in each case.

The first factor to be considered is whether the work done is an “integral part of the employer’s business.” If the work performed is integral to the employer’s business, it is more likely the worker is economically dependent. Work can be integral even if it is performed away from the employer’s premises. The second factor is whether the “worker’s managerial skill affects the worker’s opportunity for profit or loss.” A worker in business for his or herself will typically have such an opportunity for profit. The focus is whether the worker exercises managerial skills and whether those skills affect the worker’s opportunity for both profit and loss. The third factor to be considered is “how the worker’s relative investment compares to the employer’s investment.” An independent contractor makes investments that support a business beyond one particular job. These investments must be significant to indicate the worker’s independence. Investing in tools and equipment is not necessarily a business investment or capital expenditure that indicates the worker is an independent contractor, because they may simply be required to perform the necessary work for the employer.

The fourth factor is whether “the work performed requires special skill and initiative.” Business skills, judgment, and initiative are more indicative of independent contractor status than technical skills that are used to perform the work. Even specialized skills do not indicate that workers are in the business for themselves. The fifth factor employers should consider is whether the “relationship between the worker and employer is permanent or indefinite.” Permanency suggests employment status, while working on a single project that is not continuous or repeating is more akin to an independent contractor. A lack of permanence with an employer is indicative of independent contractor status if it results from the worker’s own independent business initiative, rather than the operational characteristics of the industry. The sixth and final factor to be considered is the “nature and degree of the employer’s control.” A worker must maintain and exercise meaningful control of his or her work to be considered an independent contractor.

Under the FLSA’s broad definition of employ as “to suffer or permit to work,” most workers fall into the employee category. This expansive definition must be taken into account while applying the “economic realities” test to determine if a worker is truly an independent contractor. Taking into account the ultimate issue of whether the worker is in business for him or herself or economically dependent in the application of the “economic realities” test will prevent the detrimental outcomes of misclassification.

If your company hires independent contractors, you should consider having skilled employment counsel review those workers’ relationship with the company to ensure compliance with the FLSA.

 

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SECOND CIRCUIT INSTITUTES A NEW STANDARD FOR UNPAID INTERNSHIPS

Posted by on Jul 17, 2015 in FLSA

By: Susan L. Swatski, Esq. (sswatski@hillwallack.com) and Bryan A. Coe, Summer Associate (bcoe@hillwallack.com)

An unpaid internship can be beneficial to both interns and employers. Interns can gain valuable experience in their field while employers can help educate people who one day may work for their companies. However, confusion exists as to what type of experience must be provided to an intern for the experience to replace a paycheck. By providing an unpaid internship instead of a paid position, employers put themselves at risk of legal action, which can result in fines and back pay to the intern. A recent decision from the United States Court of Appeals for the Second Circuit provides employers with much needed guidance to craft their internship programs.

In most states, employers must conform to the United States Department of Labor’s Intern Fact Sheet when deciding if an internship qualifies to be unpaid. The DOL’s requirements are: (1) the internship should be similar to training that would be provided in school; (2) the experience should be for the student’s benefit; (3) the intern should not be a replacement for a regular employee, but instead, should be under the supervision of a regular employee; (4) the employer must provide training and not derive an immediate advantage from the intern’s activities; (5) the intern is not entitled to a job at the end of the internship; and (6) both the employer and the intern have an agreement that the intern will not receive payment for work performed. According to the Department of Labor, all six items must be present for an internship to qualify as unpaid.

In Glatt v. Fox Searchlight Pictures, Inc., the United States Court of Appeals for the Second Circuit determined that the proper question to ask is whether the intern or the employer is the “primary beneficiary” from the relationship. The Court of Appeals replaced the Department of Labor’s six factor Intern Fact Sheet with the following seven non-exhaustive factors to aid in answering whether an internship can be unpaid: (1) the extent to which the intern and the employer understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa; (2) the extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions; (3) the extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit; (4) the extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar; (5) the extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning; (6) the extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and, (7) the extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship. When deciding if a person should be classified as an employee, employers should balance these factors. No one factor is dispositive to conclude the intern should be not considered an employee.

A second important point to be taken away from the Glatt ruling is that interns will find it much harder to certify a class to bring their claims, because although the primary beneficiary test may be partially answered using generalized proof, the more substantial questions require individualized proofs to very fact specific inquiries.

Employers should be aware of the Second Circuit’s break from the DOL’s Intern Fact Sheet and account for the distinctions between the “primary beneficiary test” and the Fact Sheet when creating an internship program. As a general matter, when creating an internship program, employers should focus on the educational component. Programs such as guest speakers and information sessions can help tip the scale towards the internship being more beneficial to the employee. The greater the amount of educational opportunities that are present, the more likely a court will find an intern to be the “primary beneficiary” of the relationship.

Currently, only employers who are located in New York, Connecticut and Vermont are affected by this ruling. However, employers in other states should be aware of this ruling because it shows a change in thinking regarding unpaid internships. If your company offers an unpaid internship, you should have it reviewed by skilled employment law counsel to ensure the program complies with the law in your jurisdiction.

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Minimum Wage Update

Posted by on Feb 3, 2015 in Benefits, FLSA

By Felicity S. Hanks, Esq. and Joseph M. McGinley, Esq.

Minimum wage reform has become a prevalent and at times polarizing issue. The trend in recent years has been to increase wages above federal minimum standards. Currently, the federal minimum wage is $7.25/hour.[1] This rate is a floor; states may legislate to provide higher minimum wage rates, but may not pay workers below the federal standard. In complying with this provision, U.S. states and territories are split in whether they provide for higher wage benefits to workers or rely on the federal minimum.

Currently, thirty states and territories have minimum wage requirements that exceed the federal minimum of $7.25/hour.[2] The remaining states and territories meet the federal standard either expressly or by default: seventeen states have minimum wage rates equivalent to the federal minimum,[3] five states have no minimum wage law (thus, federal law applies),[4] and two states have minimum wage rates lower than the federal minimum (those laws are superseded by the federal minimum wage).[5]

On February 12, 2014, President Obama signed Executive Order 13658, which raised the minimum wage for workers on Federal construction and service contracts to $10.10/hour. Although President Obama’s executive order increased rates for federal contract workers, only Congress has the authority to increase the federal minimum wage rate; it has declined to do so.

The minimum wage rate in Pennsylvania is set equal the federal standard.[6] New Jersey provides for a slightly higher rate at $8.38/hour. Interestingly, the New Jersey minimum wage will continue to change in upcoming years in tandem with the consumer price index.[7]

Many states continue to debate raising their minimum wage requirements; in response to legislative inaction, some localities have taken matters into their own hands. Major cities such as Seattle, San Francisco, and Chicago have voted to gradually increase to minimum wage to $15/hour in the upcoming years, while Oakland has voted to increase its minimum wage to $10.10/hour.

Due to the wide variation of minimum wage rates across the United States, it is important for businesses to keep abreast of federal, state, and local minimum wage requirements, especially if a business operates and employs workers in multiple states. We encourage employers to consult with employment attorneys regarding any minimum wage issues or concerns and to stay aware of proposed legislation.

 

[1]Fair Labor Standards Act, 29 U.S.C. § 206.

[2] Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, South Dakota, Vermont, Washington, and West Virginia.

[3] Guam, Idaho, Indiana, Iowa, Kansas, Kentucky, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Puerto Rico, Texas, Utah, Virginia, the U.S. Virgin Islands, and Wisconsin.

[4] Alabama, Louisiana, Mississippi, South Carolina, and Tennessee all have no minimum wage laws.

[5] Georgia and Wyoming.

[6] 43 P.S. § 333.101 et seq.

[7] N.J.S.A. 34:11-56 et seq.

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Fair Labor Standards Act Violations cost Chickie’s and Pete’s $6.8 Million

Posted by on Mar 6, 2014 in FLSA, Uncategorized

By Felicity S. Hanks, Esq. (fhanks@hillwallack.com)

Our region’s beloved sport’s bar and Crabfries architect, Chickie’s and Pete’s has signed a consent judgment agreeing to pay $6,842,412  for back wages and damages for violations of federal minimum wage, overtime and record keeping requirements, and for improperly taking tips from its servers.  The United Stated Department of Labor (“DOL”) announced the result of its year-long investigation into the company in a News Release dated February 20, 2014.  The News Release is available on the DOL website at:  http://www.dol.gov/opa/media/press/whd/WHD20140044.htm.

The Fair Labor Standards Act (“FLSA”) sets out the federal minimum wage requirement of $7.25 per hour.  If an employee total earning with tips and its base wage do not equal the minimum wage requirement, the employer is required to make up the difference during that pay period. However, because servers typically earn tips, the restaurant owner can claim a “tip credit” and pay the employee a base wage of only $2.13.  The presumption is that the employee will receive tips that cover the difference up to the full minimum wage.

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