Wage and Hour Defense Blog

In Guthrie v. Rainbow Fencing Inc., 113 F.4^th 300 (2d Cir. 2024), the Second Circuit weighed in on a brewing dispute among New York district courts as to whether (and how) a plaintiff’s allegations may establish Article III standing to pursue wage notice or wage statement claims under New York’s Wage Theft Prevention Act (“WTPA”) in federal court. 

Basic Requirements of the WTPA

The WTPA requires covered businesses to provide employees with both: (1) a notice, at the time of hiring, outlining their rate of pay, allowances, certain healthcare benefits, among other things; and (2) wage statements, each time wages are paid, describing the calculation of regular and overtime pay, along with other related information regarding pay deductions or allowances.

Even minor compliance errors with these statutory requirements can expose businesses to liability.  Recoverable damages for an individual plaintiff’s wage notice and wage statement claims are capped at a combined total of $10,000; however, when asserted on behalf of a large putative class, WTPA damages can potentially eclipse any claims for alleged underpayments, which will create significant potential exposure for businesses.

With more than 24 million mothers with children under the age of 18 in the U.S. workforce, many of whom breastfeed their children, it is important for employers to understand the break time and pumping space protections afforded to nursing mothers by the Fair Labor Standards Act (FLSA).

Reasonable Break Time to Pump

Under the FLSA, nursing employees are entitled to reasonable break time during the workday to express breast milk for their nursing child for one year following the child’s birth. The employee must be entitled to a break “each time such employee has need to express milk.” The frequency, duration, and timing of the breaks an employee may need will likely vary depending on the employee and child.

Employers are not required to pay non-exempt employees for break time to pump unless otherwise required by applicable law, or if the employees are not completely relieved of their duties while pumping. Under the Department of Labor (DOL) regulations implementing the FLSA, breaks of 20 minutes or less must be paid, and if an employer provides such breaks to its employees generally, nursing employees may use such paid breaks to pump. Additionally, if an employer provides paid breaks to all employees, the employer must pay employees who choose to pump during their paid breaks.

On August 23, the United States Court of Appeals for the Fifth Circuit issued its much-anticipated decision in Restaurant Law Center v. United States Department of Labor.  In one of the very first federal appellate court rulings since the Supreme Court overruled Chevron USA Inc. v. Natural Resources Defense Council, Inc.  this year, the unanimous three-judge panel concluded that the Department of Labor’s 2021 Final Rule regarding tipped employees and the minimum wage, commonly known as the “80/20 Rule” or the “80/20/30 Rule,” is both contrary to the pertinent statutory text and  arbitrary and capricious.  As a result, the court vacated the rule.

Background: Minimum Wage, the Tip Credit, Dual Jobs, and 80/20

The Fair Labor Standards Act (the “FLSA”) allows employers to count a portion of tips received by a “tipped employee” toward satisfying the federal minimum wage obligation.  The statute defines a “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.”  That portion of the statute has been in place, largely unchanged, since 1966.  Whether an employee counts as a “tipped employee” determines whether the employer may pay a reduced hourly wage of as low as $2.13, so long as the tips suffice to make up the difference to minimum wage.  Employees who are not tipped employees must receive at least the full minimum wage directly from their employer.

In 1967, the Department of Labor issued a regulation positing that workers may have more than one job with an employer, one of which involves tips and one or more of which does not.  The example the Department used was a hotel employee who works some shifts as a server in the hotel restaurant and other shifts as the hotel’s maintenance person.  The so-called “dual jobs” regulation took the position that the employer may pay the lower hourly wage, known as taking the tip credit, for the time spent in the tipped occupation of server, but not for the time spent in the untipped maintenance occupation.

Employers are generally required to pay nonexempt employees overtime compensation of at least one and a half times their regular rate of pay for hours worked over 40 in a workweek. While this is nothing new for employers, determining an employee’s regular rate is often more complex than one might think, and it is often a great cause of confusion for employers.

As we have previously discussed on this blog, the regular rate is a term of art that encompasses all nondiscretionary payments to an employee, and not just hourly wages—subject to certain exceptions. (For a discussion of what must be included in the regular rate, please see our prior post.) If, for instance, an hourly, non-exempt employee receives a productivity bonus, the regular rate for that employee is the hourly rate of pay plus the productivity bonus.

The Department of Labor Fact Sheet #56A explains the basic calculation of the regular rate in the following way:

Total compensation in the workweek (exclusive of statutory exclusions) ÷ Total hours worked in the workweek = Regular rate for the workweek

The Michigan Supreme Court has written the latest, and perhaps last, chapter of an ongoing saga affecting most Michigan employers. In Mothering Justice v. Attorney General, the Michigan Supreme Court fully restored sweeping minimum wage and paid sick leave laws, bringing finality to a legal controversy that has been churning since the laws were first proposed in 2018. Pursuant to that decision, the laws will take full effect in their original form, about six months from now, on February 21, 2025.

How We Got Here

In 2018, labor advocacy groups presented the Michigan legislature with two voter initiatives related to minimum wage (the Improved Workforce Opportunity Wage Act (IWOWA)) and paid sick leave (the Earned Sick Time Act (ESTA)) through the state’s citizen initiative process. Michigan’s constitution allows voter initiatives to propose legislation, and the legislature may take one of these three actions: (1) adopt “without change or amendment”; (2) reject and place the proposed legislation on the ballot; or (3) reject and propose an amendment, placing both on the ballot. As we previously explained, the Legislature quickly enacted amended versions of the IWOWA (2018 PA 368) and the ESTA, which was renamed the Paid Medical Leave Act (PMLA) (2018 PA 369), with significant changes. As we detailed here, the amended versions of these laws were less burdensome to employers.

The legislature’s actions led the initiatives’ advocates to file a legal action challenging the lawmakers’ authority to modify a voter initiative so quickly and dramatically through a process labeled “adopt and amend.”  That lawsuit has wended its way through Michigan’s courts, with the final outcome decided on July 31, 2024, echoing that of the initial holding issued in 2022: the Michigan legislature’s adoption-and-amendment of the two initiatives violated the State constitution’s provision on voter initiatives. Hence, those amendments are void as unconstitutional and the laws as originally conceived should take effect.

On August 1, 2024, in Turrieta v. Lyft et al., the California Supreme Court held that a plaintiff in a Private Attorneys General Act (“PAGA”) action does not have a right to intervene -- or to object to or vacate a judgment -- in a separate PAGA action involving overlapping claims.

The Court’s conclusion resolves an issue that is not uncommon in PAGA litigation where a resolution is reached in one of several separate PAGA lawsuits filed against the same employer. And it will make it easier for parties to resolve PAGA actions without fear that settlements will be toppled by other employees or their lawyers. 

In an increasingly cashless society, many employers are considering moving to payroll debit cards to provide workers with greater flexibility and convenience. However, employers considering offering payroll debit cards should be aware of a number of potential pitfalls associated with the technology, ensuring that their payroll debit card plan is compliant with relevant state laws.

Why Use a Payroll Debit Card?

There a number of benefits associated with payroll debit cards both for employers and employees. Employers can benefit from payroll debit cards by avoiding the cost of printing and mailing paychecks for all participating employees. Payroll debit cards are helpful for employees who do not have bank accounts and wish to avoid check cashing fees or other fees associated with maintaining a bank account. Additionally, payroll debit cards may provide a nimbler mechanism for employers who desire to offer a more flexible pay period option for employees, such as daily or instant pay.

On July 25, 2024, the California Supreme Court issued its long-awaited ruling in Castellanos et al., v. State of California and Protect App-Based Drivers and Services, et al., upholding the 2020 voter initiative known as Proposition 22 the allows certain gig economy companies to classify drivers as independent contractors.

In 2019, California Assembly Bill 5, also known as AB5, expanded the landmark California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court, and made the "ABC" test law. 

Much has been made about the recent, hurried legislation to amend the Private Attorneys General Act (“PAGA”) in order to take the Fair Pay and Employer Accountability Act (“FPEAA”) off the California ballot this November.  

If passed by California voters, the FPEAA would have repealed PAGA and replaced it with a new statute and a new process that were more employer-friendly -- and more employee friendly. 

(The idea of a ballot initiative to repeal or create laws may sound very unusual to anyone outside of California.  But California permits this kind of mob rule, for better or worse, so long as enough signatures are gathered and verified to qualify to be placed on the ballot.)

For all of the celebration about how these PAGA amendments will benefit employers, the PAGA amendments remind me of nothing so much as New Coke. 

You don’t know about New Coke, do you? 

You see, back in 1985, Coca-Cola announced that it was changing the longtime formula for its soda and replacing it with a new formula that everyone would love even more. There was much excitement about it.  (Keep in mind that this was before the internet, smartphones, texting, streaming, etc.)  The launch of the new version of the soda was covered in the mainstream media, and people just couldn’t wait. They actually lined up outside stores to be the first to get their hands on it.

And then New Coke was launched.

As we previously reported, the U.S. Department of Labor (DOL) issued a new final rule increasing the minimum salary amounts for the executive, administrative, and professional (EAP) and highly compensated employee exemptions. Shortly after the DOL announced its final rule, three lawsuits were filed in federal district courts in Texas challenging the DOL’s authority to increase the salary thresholds. However, despite these challenges, the first increase took effect on July 1, 2024 for all employers, except for the State of Texas as an employer.

State of Texas v. DOL

On May 22, 2024, a group of national business associations filed a complaint in the United States District Court for the Eastern District of Texas against the DOL challenging the final rule.[1] This lawsuit was later consolidated with a complaint filed in the same court by the State of Texas similarly challenging the final rule.[2] Notably, the consolidated action alleges that the final rule exceeds the DOL’s statutory authority under the Fair Labor Standards Act (“FLSA”) and the Administrative Procedure Act (“APA”), and that the final rule is arbitrary and capricious, in violation of the APA.