Articles Posted in Wage and Hour Disputes

Ridesharing companies like Uber are relative newcomers to the marketplace, but they have already had an enormous economic and legal impact. In numerous employment law claims, drivers are alleging that they are misclassified as independent contractors rather than employees. The last year has seen several important court decisions and settlements that offer good news for ridesharing drivers. Courts have ruled in plaintiffs’ favor in cases from California to Massachusetts, and putative class actions are currently pending in New Jersey and New York

Many of the lawsuits against Uber, generally considered the leading ridesharing company, assert claims under the federal Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., which governs minimum wage and overtime pay for many employers. Employees are entitled to payment of a minimum wage of $7.25 per hour, and non-exempt employees must be paid time-and-a-half for hours worked in excess of 40 per calendar week. Employers might violate the FLSA simply by failing to pay overtime, or they may do so less obviously, such as by imposing obligations on employees outside the time that they are “clocked in.” This can result in uncompensated overtime, or an hourly rate of pay that, when calculated for the amount of time actually worked, is less than minimum wage.

Drivers for Uber are challenging their status as independent contractors in lawsuits and administrative complaints around the country. A key distinction between an employee, who is entitled to the protection of statutes like FLSA, and an independent contractor is the degree of control the employer has over the person’s work. Just over one year ago, the California Labor Commissioner ruled that an Uber driver is an employee in Berwick v. Uber Technologies, Inc., No. 11-46739, order (Cal. Lab. Comm, Jun. 3, 2015).

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A controversial proposed ordinance, Ordinance 16.081, in Jersey City, New Jersey would mandate a minimum workweek of 30 hours for certain employees engaged in “business services.” The ordinance’s stated purpose is “to prevent full-time building service jobs from being unnecessarily broken into part-time jobs.” Employers have rather wide discretion under state and federal laws to define “full-time” and “part-time” for their own employees. Federal law has recently begun to define “full-time” in certain contexts, however, allegedly resulting in employers cutting hours. The Jersey City ordinance has met with substantial opposition from business leaders, resulting in the postponement of a final vote in mid-May 2016.

The Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., does not distinctly define “full-time” and “part-time” employment. A 40-hour workweek is traditionally considered “full-time,” at least in part because of overtime provisions in the FLSA and many state laws. These laws require payment of time-and-a-half to non-exempt workers for hours worked in excess of 40 hours. The principal regulation placed on employers with regard to full-time and part-time employment is consistency. If their employment policies define full-time and part-time employment, provide benefits for full-time or part-time employees, or provide certain rights to full- or -part-time employees, they must apply those policies consistently.

The Affordable Care Act (ACA), also known as “Obamacare,” defines “full-time” employment in the context of providing health insurance as an employment benefit. It states that a “large employer,” defined as one having 50 or more employees, must offer “the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan” to all employees working at least 30 hours per week. 29 U.S.C. § 4980H. This has allegedly resulted in some employers reducing hours from 40 or more hours per week to 29 or fewer, in order to avoid the health insurance mandate. In the absence of any other means to deliver access to health care, Jersey City is attempting to prevent certain employers from cutting hours.

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A lawsuit recently filed against the owner of several convenience stores in the Princeton, New Jersey area claims violations of state and federal minimum wage and overtime laws. Lopez et al. v. 7-Eleven Inc. et al., No. L-000418-16, complaint (N.J. Super. Ct., Mercer Co., Feb. 26, 2016). The three plaintiffs, who are suing on behalf of a putative class of employees and former employees, allege that their now-former employer required them to work exceedingly long hours and unlawfully withheld their pay, which was less than both the state and federal minimum wage. The former employer is a franchisee of a national chain of convenience stores. The lawsuit names both the owners and operators of the franchisee and the national franchise owner as defendants.

This lawsuit demonstrates a common problem in employment law claims when the employer is part of a franchise. Many well-known businesses with multiple locations, such as McDonald’s restaurants, do not actually share common ownership or management. The owner of the brand—which includes the logo, menu, business model, and so forth—enters into franchise agreements as the franchisor with other companies, the franchisees, to operate one or more facilities. A typical franchise agreement contains numerous requirements regarding the operation of the worksite, in the interest of maintaining consistency among all franchised locations. This is where the tricky part for employment claims comes in.

An employee or former employee can only assert a claim for violations of minimum wage and overtime laws, anti-discrimination laws, and other employment statutes against their employer. It is often relatively easy to determine who is a person’s employer, based on an employment contract or the issuance of paychecks. In the case of a person who works at a franchised location, the franchisee is probably their employer, at least on paper. The franchisee is not, however, in full control of their own business, since they have to run their operation in accordance with the franchise agreement. How much control must a franchisor exercise over a franchisee before the franchisor begins, in a legal sense, to look like the actual employer?

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In order for a worker to assert their rights under many employment statutes, they must establish that an employment relationship exists. This is often not as simple as it might seem. Multiple separate business entities are often present on a worksite, with a complicated web of legal and contractual relationships. Under a “joint employment” (JE) theory, a worker might have multiple employers for the purposes of certain legal claims. The U.S. Department of Labor’s Wage and Hour Division (WHD) recently issued guidance regarding joint employment under two federal statutes: the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.; and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), 29 U.S.C. § 1801 et seq. Administrator’s Interpretation No. 2016-1 (“AI”) (WHD, Jan. 20, 2016).

What Is Joint Employment?

The WHD defines JE very broadly. A worker might be the employee of a business entity that has contracted to provide services to another business. The AI uses the example of a hotel that subcontracts functions like housekeeping or catering to another business. Housekeeping and catering workers, in this scenario, might wear hotel uniforms. To the public, they would appear to be hotel employees. The hotel has authority over them at its worksite, including hours worked. Applying a standard model of employment, a worker could only bring a claim under a wage and hour statute like the FLSA against the staffing agency. If the hotel is a joint employer, however, it and the staffing agency might be jointly and severally liable for the worker’s damages.

The AI begins by describing a wide range of “evolving employment scenarios” that have made JE much more common around the country. AI at 1. It states that JE plays a role in hundreds of WHD investigations every year. The purpose of the AI is to offer “additional guidance” because of the increase in JE. Id. It identifies two types of JE: horizontal joint employment (HJE) and vertical joint employment (VJE).
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The federal Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., requires employers to pay a minimum wage and overtime compensation. Employees may file suit to recover wages owed under the FLSA, and they may file a class action if enough individuals have similar claims. Fed. R. Civ. P. 23. The U.S. Supreme Court heard arguments in late 2015 in a case, Tyson Foods, Inc. v. Bouaphakeo, in which the employer objects to the use of summary data, based on statistical analysis, to prove wage violations. The employees respond by arguing that the employer cannot use its own recordkeeping failure as a defense against FLSA liability. The decision could have a significant impact on how classes of employees can prove their claims in FLSA suits.

A common FLSA claim involves employers who require workers to spend unpaid time performing work-related tasks. If the time spent on these tasks pushes an employee’s total amount of work time over 40 hours in a week, or pushes the average hourly wage below the federal minimum of $7.25 per hour, the employer may be liable for unpaid wages and other damages. Time spent changing into and out of work clothes or uniforms, also known as “donning and doffing,” is one example of this sort of claim.

Plaintiffs who have substantially similar claims against an employer can pool their claims in a class action, provided they meet the four requirements of numerosity of plaintiffs, commonality of claims, typicality of the class representatives’ claims, and fair and adequate representation by the class representatives. Fed. R. Civ. P. 23(a). The FLSA allows employees to file a collective action against an employer. 29 U.S.C. § 216(b). The key difference between the two is that the FLSA requires plaintiffs to give consent, or “opt in,” to being part of the case.

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The term “wage theft” refers to a broad range of unlawful employment practices that deprive employees of wages they have earned. This might include under-reporting of hours worked, underpayment for reported hours, illegitimate paycheck withholdings, requiring employees to work extra hours without pay, or even outright theft of tips. Employment statutes at the federal and state levels, such as the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., and the New Jersey Wage and Hour Law (NJWHL), N.J. Rev. Stat. § 34:11-56a et seq., require employers to pay a minimum wage, pay extra for overtime, and keep detailed payroll records. None of these protections, however, applies to independent contractors, who are defined as independent of any one employer but are also just as susceptible to wage theft. A bill pending in the New York City Council would remedy this situation for independent contractors, including thousands of people who identify as freelancers, within the city.

The FLSA requires employers to maintain payroll records for all exempt and non-exempt employees. These records must include personal information like name and address, and non-exempt employee records must identify hourly rates, days worked, and hours worked each day, amounts owed for regular and overtime hours, itemized amounts deducted from paychecks, and dates and amounts of all paychecks. 29 C.F.R. §§ 516.2, 516.3. The U.S. Department of Labor’s Wage and Hour Division (WHD) enforces these regulations.

Payroll records assist regulators investigating alleged wage theft, as well as employees asserting claims for themselves. Employees can bring claims for underpayment or non-payment of wages under the minimum wage and overtime provisions of the FLSA and the NJWHL, and the WHD and New Jersey officials may also enforce these laws on workers’ behalf. In addition to civil liability for back wages and other damages, penalties under the FLSA include a fine of up to $10,000 and, for repeat offenders, imprisonment for up to six months. 29 U.S.C. §§ 215(a)(2), 216(a).

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A New Jersey federal judge approved a settlement in a lawsuit brought by Essex County corrections officers, alleging underpayment of overtime. Davis, et al. v. Essex County, No. 2:14-cv-01122, opinion (D.N.J., Dec. 1, 2015). The plaintiffs asserted causes of action under both the federal Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.; and the New Jersey Wage and Hour Law (NJWHL), N.J. Rev. Stat. § 34:11-56a et seq. They brought suit on behalf of themselves and other employees with similar claims, as allowed by the FLSA. The parties eventually came to an agreement regarding unpaid wages, liquidated damages, costs, and attorney’s fees. The court reviewed the settlement to ensure that it satisfied the FLSA’s requirements regarding collective actions. It certified a class of plaintiffs and approved a settlement totaling $300,000.

Both the FLSA and the NJWHL require employers to pay overtime compensation to certain employees. This generally applies to hourly workers who do not hold a managerial or executive position. An employer must pay a rate of time-and-a-half for any time worked more than 40 hours during a calendar week. See 29 U.S.C. § 207, N.J. Rev. Stat. § 34:11-56a4. A common example of an overtime claim involves an employer who requires employees to perform certain tasks while they are “off the clock,” such as changing into or out of uniform. Since this task is mandatory, it is legally considered part of the employee’s job. If it pushes the amount of time spent at work over 40 hours in a week, the employee is entitled to overtime pay.

An employee can collect unpaid overtime, court costs, and other damages under the FLSA and the NJWHL. Individual employees may not have a large enough claim for a lawsuit to be feasible, which is where a type of lawsuit known as a collective action comes into play. Much as in a class action, see Fed. R. Civ. P. 23, one or more plaintiffs can sue on behalf of a class of individuals who are in similar situations and have similar legal claims. 29 U.S.C. § 216(b). An employee who might be owed thousands of dollars in overtime pay is more likely to get the employer’s attention if the lawsuit includes hundreds or thousands of their co-workers. Plaintiffs must consent to be part of a collective action under the FLSA, while many class actions require class members to “opt out.”

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A former intern for the company founded by Mary-Kate and Ashley Olsen, commonly known as the Olsen Twins, has filed a putative class action against the company in a Manhattan state court. Lalani v. Dualstar Entm’t Group, LLC, No. 158205/2015, complaint (N.Y. Sup. Ct., N.Y. Co., Aug. 7, 2015). The lawsuit alleges that the company unlawfully classified workers as interns and therefore did not pay them any wages. It asserts causes of action under state minimum wage law. People employed as interns often forego wages in favor of academic credit or specific job training. Courts are beginning to enforce the right of interns to be treated as paid employees if they are not receiving an educational benefit from the job. See, e.g. Glatt v. Fox Searchlight Pictures, No. 1:11-cv-06784, mem. order (S.D.N.Y., Jun. 11, 2013) (finding that production interns on the film Black Swan were entitled to compensation).

The Olsen Twins first became famous by jointly playing the character Michelle Tanner on the ABC sitcom Full House from 1987, when they were barely one year old, until 1995. They reportedly founded Dualstar, the defendant in the present case, at age six in 1993. Since then, they have built a massive business that includes films, clothing, and other products, and that is valued at around $1 billion.

According to her complaint, the lead plaintiff worked for the defendant from May through September 2012. Her job duties included office administrative tasks and support of paid employees. She claims that she worked five days a week for approximately 50 hours each week and received no compensation for the work she performed. She also received no “academic or vocational training” through her work for the defendant. Lalani, complaint at 5.
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Workers in New Jersey have several methods of asserting their rights under federal, state, and local employment laws. While retaining the services of an employment law attorney offers an individual the best opportunity to work with an experienced professional through all of the steps of the legal process, certain government agencies sometimes pursue civil claims against employers on employees’ behalf. The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) recently announced that it is holding a substantial sum of money obtained in enforcement actions against employers around the country, including more than $7 million owed to nearly 10,000 New Jersey workers that remains unclaimed.

The DOL’s regional office in Philadelphia announced in mid-August 2015 that the WHD is holding $7,157,792 obtained from New Jersey private-sector employers, mostly through settlement agreements. This money constitutes back pay owed to 9,953 employees. The WHD and other agencies are often able to notify workers of the availability of money obtained through an enforcement action. If an individual has moved out of state, changed their name through marriage, or even just switched jobs, however, the agency may not be able to locate them.

A website maintained by the DOL entitled “Workers Owed Wages,” or simply “WOW,” includes a search function that allows workers to see if the DOL has collected money from their employer. They may then search their own name to see if they are entitled to payment. The site has reportedly helped people around the country claim over $800,000–a small amount in comparison to the amount that remains unclaimed in New Jersey alone. If money remains unclaimed for three years after collection, the U.S. Treasury can keep it.
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The wage gap has become a matter of serious concern for many in this country. Various reports show income rising for many business executives, while wages stagnate, or even decline, for most working people. Employment statutes at the federal, state, and local levels protect workers against a wide range of untenable employment situations and unjust acts by employers, but this does not include a wide disparity in pay between a company’s low-level employees and its chief executive officer (CEO). The Securities and Exchange Commission (SEC) issued a final rule in early August 2015 requiring publicly traded companies to disclose the ratio between CEO salary and median employee compensation. This rule implements a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), Pub. L. 111-203, but it has been the subject of substantial criticism from the business sector. It might not have an immediate impact on improving employees’ workplace rights, but it could be an important step in that direction.

Employees in New Jersey are generally protected from workplace discrimination and harassment, based on factors such as race, sex, religion, and national origin, by the New Jersey Law Against Discrimination (NJLAD), N.J. Rev. Stat. § 10:5-1 et seq., and Title VII of the federal Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. The NJLAD includes additional categories of protection, such as sexual orientation and gender identity. The New Jersey Wage and Hour Law (NJWHL), N.J. Rev. Stat. § 34:11-56a et seq., sets a statewide minimum wage and establishes rules for overtime compensation. At the federal level, the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., performs a similar function, albeit with a lower minimum wage.

These laws could work together to protect employees in a situation where certain employees receive lower pay than other employees with the same or similar qualifications, performing the same or a similar job, if the disparity is related to one or more of the categories protected from discrimination. Nothing in state or federal law says that a CEO’s pay cannot be higher than an employee’s pay, and despite some particularly heated political rhetoric, no one is suggesting a rule like that. The issue is that many workers put in 40 or more hours of work per week, and yet they struggle to make ends meet, even frugally. The SEC’s regulation does not directly address this issue, nor issues of employee wage complaints, but it helps put these issues closer to the front burner, so to speak.
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