Wage and Hour Defense Blog

On May 3, 2023, New York Governor Kathy Hochul announced – and then signed into law – the New York Legislature’s 2024 Budget Agreement (“Budget”), which includes increases to the state’s minimum wage.  Effective January 1, 2024, the minimum wage will increase to $16 per hour in New York City and Nassau, Suffolk, and Westchester counties, and to $15 per hour in the remainder of the state.  The minimum wage will then increase by another $.50 each year in 2025 and 2026—reaching $17 per hour in downstate New York by 2026. Subsequent annual increases to the minimum wage will be tied to the inflation rate. The State Department of Labor (DOL) is required to publish future adjusted minimum wage rates by no later than October 1st of each year.

On April 28, 2023, the U.S. Court of Appeals for the Fifth Circuit reversed and remanded a decision from the Western District of Texas declining to issue a preliminary injunction barring the Department of Labor (“DOL”) from enforcing a regulation known as the “80/20/30 rule.”

As we previously reported, on October 29, 2021, the DOL issued a final rule for determining which tipped employees may receive “tip credit” in lieu of receiving the full minimum wage directly from the employer.  Under the 80/20/30 rule, employers must pay employees at least the minimum wage if they spend more than 20% of their time on tasks that do not immediately and directly generate tips, including wiping down tables, filling salt and pepper shakers, rolling silverware into napkins, and other duties referred to in the industry as “side work,” or if they spend more than 30 consecutive minutes performing such tasks.  The Restaurant Law Center and the Texas Restaurant Association promptly sought a preliminary injunction in the Western District of Texas.

On March 23, 2023, Utah Governor Spencer Cox signed into law Senate Bill 73 (“SB 73”) expanding the group of employees eligible for tip pooling by allowing employers to include non-tipped employees in a bona fide tip pooling or sharing arrangement.

Historically, only “tipped employees” were permitted to participate in a tip pooling or sharing arrangement under Utah State law. This form of tip pooling is also allowed under federal law and is otherwise known as a traditional tip pool. A “tipped employee” is one who customarily and regularly receives tips or gratuities.”[1] Common examples of tipped employees include waiters and waitresses, whereas dishwashers, chefs, cooks, and janitors are examples of non-tipped employees.

The lingering morning chill in the air (at least, here, in the Northeast) suggests that summer is not quite here, but as the daylight persists through the evening hours, businesses small and large are gearing up for yet another summer – intern – season.

In anticipation of the arrival of these ambitious and eager workers, companies’ human resources professionals and stakeholders are asking the age-old questions:

Should these interns be classified as “employees” of the company?

Must they be compensated?

Isn’t knowledge and real-world experience the appropriate reward (and maybe some academic credit)?

Is this a wage and hour violation?

The answer to this question is that, it depends, which is a dependably frustrating response from a management-side employment lawyer.

A little over two years ago, the U.S. Court of Appeals for the Fifth Circuit became the first federal appellate court in the country to reject the widespread and longstanding two-step approach of first “conditionally” certifying Fair Labor Standards Act (“FLSA”) collective actions under a very lenient, plaintiff-friendly standard, followed by applying more rigorous scrutiny after the close of discovery at the “decertification” or “final certification” stage.  As we discussed here, the Fifth Circuit concluded in Swales v. KLLM Transport Services, LLC that the FLSA requires not two steps, but instead a single step that carefully examines whether the group of workers at issue is “similarly situated” before a court authorizes any notices to potential opt-in plaintiffs.

work | \ wərk \ (noun):  activity in which one exerts strength or faculties to do or perform something

In common parlance, the concept of “work” connotes some physical or mental exertion.  The law, however, defines the term more broadly, and properly compensating employees often is not as simple as paying for all time spent performing “work” in the usual sense of that term.  The Fair Labor Standard Act (“FLSA”) and the laws of many states require employers to also pay for certain periods of time during which employees are idle and simply waiting to begin working—even if those employees never become engaged in work. 

On March 10, 2023, a unanimous three-judge panel upheld an Oregon federal court’s ruling that time Amazon employees spent undergoing mandatory security screenings before and after work shifts and off-premises meal breaks was not compensable, as the screenings were not integral and indispensable to their jobs under state law.

Following the California Supreme Court’s remand of Naranjo v. Spectrum Security Services, Inc., the California Court of Appeal in that same case held that the defendant-employer had not committed “knowing and intentional” violations of the wage statement statute by not including meal period premiums on the wage statements and had not “willfully” paid all wages due at the end of employment by not previously paying meal period premiums that were owed. The Court held that, although the employer did not prevail on its defense that employees in a certified class action were subject to valid on-duty meal period agreements, neither waiting time penalties (capped at 30 days’ of wages at the daily rate of pay for each former employee) nor wage statement penalties (capped at $4,000 per employee) could be imposed against the employer given the good faith dispute that any meal period premiums were owed.

The Washington, D.C. Council (the Council) has yet again taken action to delay enforcement of Initiative 82, the District’s new law to eliminate the use of the “tip credit” for certain service industry employees by July 1, 2027.

Gratuities are often helpful for both employees and their employers: tips supplement a worker’s income, and federal law and the laws of most states allow employers to credit a portion of a worker’s tips toward the company’s minimum wage obligations. But what exactly is a tip and how do employers take this so-called “tip credit?”

What is a tip or gratuity?