Wage and Hour Defense Blog

Over the past three decades, California voters have reliably approved proposals to increase the statewide minimum wage. Until now.

In November,  by a slim margin of 50.7% to 49.3%, voters surprised many by rejecting Proposition 32, which would have increased minimum wages for most non-exempt employees in the state.

Under Proposition 32, the hourly minimum wage for non-exempt employees working for employers with 26 or more employees would have immediately increased from $16 to $17 for the remainder of 2024, with an additional increase to $18 per hour on January 1, 2025. Those working for employers with 25 or fewer employees would have seen an increase the hourly minimum wage from $16 to $17 on January 1, 2025.

The rejection of Proposition 32 in a state that has historically supported minimum wage increases could signal a shift in the labor landscape. It may reflect concerns about rising costs and fears that families and businesses are being priced out of the Golden State. And the vote could be a bellwether for the nation as California is well known as a trendsetting state, especially on wage-and-hour issues.

On November 15, 2024, a district judge for the U.S. District Court for the Eastern District of Texas issued a significant, albeit somewhat unsurprising, opinion in Texas v. Department of Labor, vacating the U.S. Department of Labor’s (“DOL”) 2024 Final Overtime Rule (“Final Rule”), which, as we previously reported (here and here), had raised the minimum salary threshold on July 1, 2024, and was set to further increase the minimum salary threshold on January 1, 2025, for the executive, administrative, and professional (“EAP”) exemptions, and the highly compensated employee (“HCE”) exemption.

As a refresher, the Final Rule featured three components: (1) an increase to $844 per week (or $43,888 per year) for the EAP exemptions and to $132,964 for the HCE exemption that took effect on July 1, 2024; (2) a further increase to $1,128 per week (or $58,656 per year) for the EAP exemptions and to $151,164 for the HCE exemption on January 1, 2025; and (3) automatic increases every three years, beginning July 1, 2027.

The DOL previously issued a similar overtime final rule in 2019 that increased the minimum salary threshold from $455 per week to $684 per week. Unlike the 2024 Final Rule, the 2019 rule withstood legal challenge, and was upheld this past September by the U.S. District Court of Appeals for the Fifth Circuit.

On Election Day 2024, voters in six states weighed in on ballot initiatives that addressed several employment law topics. Among these were propositions to change state minimum wages and mandate paid sick leave for workers. The outcomes were mixed.

Alaska

In Alaska, voters passed by a narrow margin Ballot Measure 1, which will increase the state’s minimum wage from the current rate of $11.73 per hour to $13.00 per hour on July 1, 2025. It will subsequently rise to $14.00 per hour on July 1, 2026, and $15.00 per hour on July 1, 2027. Increases thereafter will be calculated based on inflation.

Ballot Measure 1 included other provisions affecting workplaces. Its passage means that many employers will need to comply with new paid sick leave requirements. Starting July 1, 2025, eligible employees will accrue a minimum of one hour of paid sick leave for every 30 hours worked and will be allowed to use at least 40 and up to 56 hours of accrued paid sick leave annually, depending on how many employees work for their employer.

A third portion of Ballot Measure 1, also effective July 1, 2025, prohibits so-called “captive audience” meetings. The new law will prohibit employers from retaliating against employees who refuse to attend company meetings about political or religious topics.

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.