The Restaurant Law Center, a public policy affiliate of the National Restaurant Association, has filed suit against the Department of Labor and its Wage and Hour Division, seeking to declare unlawful the DOL’s 2012 revision to its Field Operations Handbook, purporting to establish, through sub-regulatory guidance, the “80/20” tip credit rule or “20% Rule.” Restaurant Law Center v. U.S. Dept. of Labor, No. 18-cv-567 (W.D. Tex. July 6, 2018). The 80/20 Rule seeks to limit the availability of the tip credit when tipped employees spend more than 20% of their time performing allegedly non-tip generating duties. One of several problems in applying such a rule is identifying what is, and what is not, an allegedly “tip-generating” duty.
Articles Discussing Wage And Hour Issues In Particular Industries.
In the past year, the U.S. Department of Labor (DOL) has made several announcements concerning the evolution of the tip pooling rules. These have focused on employees who had been banned from inclusion in a tip pooling arrangement due to the nature of their work, even if they earned the federal minimum wage and their employer did not claim a tip credit on their wages. (For a full discussion of the prior announcements, please see our December 13, 2017 and September 20, 2017 articles.)
As reported last week, on March 23rd, President Trump signed into law a massive spending bill that, among other things, amended the Fair Labor Standards Act (FLSA) to clarify that a manager or supervisor may not keep his employees’ tips. The amendment, however, did not define the term “manager” or “supervisor.” Further, although the March 23rd amendment eliminated a 2011 Department of Labor (DOL) regulation that prohibited an employer from requiring a tip pool with employees other than those who “customarily and regularly receive tips” even if it paid the employee at least the minimum wage, the amendment did not state that the business practice was acceptable.
On March 27, 2018, President Donald Trump signed into law Congress’s $1.3 trillion, 2,232-page omnibus budget bill, the Consolidated Appropriations Act, 2018. Notably, on page 2,025, Congress amended the Fair Labor Standards Act by addressing rules affecting tipped employees and tip ownership, and putting to rest a notice of proposed rulemaking on the same subject. The FLSA amendment left open many questions, some of which were answered on April 6, 2018, when the Department of Labor issued Field Assistance Bulletin No. 2018-3.
On April 2, 2018, in Encino Motorcars, LLC v. Hector Navarro, et al., the U.S. Supreme Court held that automobile dealership “service advisors” are exempt from the Fair Labor Standards Act (FLSA) overtime-pay requirement under 29 U.S.C. § 207(a), which requires that an employer pay overtime to covered employees who work more than 40 hours in a week. The exemption at issue applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements…” § 213(b)(10)(A). Petitioner Encino Motorcars, LLC was a Mercedes-Benz dealership in California. Respondents were current and former service advisors for the petitioner.
The Fair Labor Standards Act (FLSA) requires employers to pay overtime compensation to covered employees, but exempts from overtime numerous categories of workers. Traditionally, these exemptions have been construed narrowly against the employer asserting them. Not anymore.
After years of litigation, including two trips to the U.S. Supreme Court, on whether service advisors who work in an automobile dealership are exempt from overtime under the Fair Labor Standards Act (FLSA), the Court finally has held, in a 5-4 decision, that service advisors are exempt from overtime under the “automobile dealer” exemption applicable to salesmen, partsmen, and mechanics. Encino Motorcars, LLC v. Navarro, 2018 U.S. LEXIS 2065 (Apr. 2, 2018). But the case has implications far beyond the industry-specific exemption.
Today, the United States Supreme Court issued its decision in Encino Motorcars, LLC v. Navarro, holding by a 5-4 vote that service advisors employed by a car dealership are exempt from overtime under the FLSA.
Earlier today (April 2, 2018), the U.S. Supreme Court ruled that auto service advisers (also commonly referred to as “service writers”) are exempt from overtime under the Fair Labor Standards Act (“FLSA”). Today’s ruling in Encino Motorcars LLC v. Navarro et. al. has affirmatively answered the long-standing question as to whether auto service advisers are covered by the FLSA’s “salesman” overtime exemption, which includes “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles.” The Court’s decision overturned the Ninth Circuit Court of Appeals ruling that service advisors do not fall under the exemption, and followed rulings in both the Fourth and Fifth Circuit Court of Appeals holding that they were exempt from overtime.
Executive Summary: On April 2, 2018, the U.S. Supreme Court ruled 5-4 in Encino Motorcars, LLC v. Navarro that service advisors at automotive dealerships are exempt from overtime. The exemption at issue involves “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles.” 29 U.S.C. 213 (b)(10). The Supreme Court reversed the Ninth U.S. Circuit Court of Appeals which had ruled that based on a plain reading of statutory text, principles of statutory interpretation (narrow construction of FLSA exemptions), and legislative history, the exemption does not encompass service advisors.
On March 23rd, President Trump signed into law a massive spending bill. Buried on page 2025 of the spending bill, available here, is the following amendment to Section 203(m) of the Fair Labor Standards Act (FLSA), the federal wage-hour law: “An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.” The new law also states that any employers who violate this rule will be liable to the employees in the amount of the tips that were taken, “an additional equal amount as liquidated damages,” and “a civil penalty not to exceed $1,100 for each such violation,” as the U.S. Department of Labor (DOL) shall determine. The back story to this change in the wage-hour law is important to understanding its impact on wage-hour enforcement going forward.
An amendment to the Fair Labor Standards Act (FLSA) in the omnibus budget bill, “Consolidated Appropriations Act, 2018,” passed by Congress and signed by President Donald Trump on March 23, 2018, provides that an employer “may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”
Executive Summary: On February 16, 2018, the United States Court of Appeals for the Ninth Circuit granted en banc review of Marsh v. J. Alexander’s LLC, 869 F.3d 1108, creating a new layer of uncertainty for hospitality employers. The previous decision by a three-judge panel on September 6, 2017, had rejected what is commonly called the “80/20 rule,” which states that hospitality employers may not reduce a tip-earning employee’s hourly pay below the minimum wage when that employee spends more than 20 percent of his or her workweek on non-tip-earning tasks. The case will now be reconsidered by a larger panel of the Ninth Circuit, with oral argument scheduled for the week of March 19, 2018. The grant of en banc review suggests an intention to reconsider the panel’s prior holding or analysis.
Federal regulations currently treat tips as the employee’s property, regardless of whether the employer pays that employee the minimum wage or whether it uses a tip credit to satisfy the minimum wage requirement. Recently, the federal Department of Labor (DOL) proposed a rule that, if passed this year, would allow employers to require the sharing of tips with employees who do not customarily receive direct tips (such as restaurant cooks, dish washers, and similar workers), so long as the employer pays employees the full federal minimum wage of $7.25 per hour. Employers who use the tip credit option to satisfy the minimum wage obligation would not be allowed to require tip sharing with workers who do not customarily receive tips.
A recent federal court decision has added to the confusion surrounding the application of the U.S. Department of Labor’s (DOL) “home care” overtime rule and New York’s “13-hour” rule regarding compensable work hours for certain home care aides. In De Carrasco v. Life Care Services, Inc., 2017 WL 6403521 (S.D.N.Y. Dec. 15, 2017), the U.S. District Court for the Southern District of New York held—in conflict with other courts—that the home care rule took effect on January 1, 2015, but found that home care aides who work 24-hour shifts are not entitled to pay for meal and sleep periods.