Articles Posted in Wage and Hour Disputes

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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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The United States generally lags behind many other nations when it comes to various employment benefits, particularly paid leave. Allowing employees to take time off when they are sick, without having to worry about losing pay, seems like a sensible policy, but sick leave is entirely voluntary for most employers around the country. Workers without paid sick leave can put other workers’ health at risk by coming in when they should be recuperating at home. Only a handful of states and cities have laws requiring employers to provide paid sick leave, but the situation may be improving. At least eight New Jersey cities have enacted paid sick leave ordinances, and a pending New Jersey bill would require paid sick leave and would allow employees to file civil claims for violations.

Laws like the federal Family and Medical Leave Act (FMLA), 29 U.S.C. § 2601 et seq., require covered employers to allow qualifying employees to take up to 12 weeks of leave during a 12-month period for personal or family medical reasons. Many employees do not qualify for FMLA coverage, however, such as when they have not accrued enough work history with their employer, or the employer is too small to be covered. The FMLA and many state laws also do not require the leave to be paid.

Currently, only four states require paid sick leave: California, Connecticut, Massachusetts, and Oregon. Eligibility requirements for coverage vary from state to state, with the minimum number of employees ranging from a high of 50 in Connecticut to coverage of nearly all employers in Oregon. Employees may bring private lawsuits against their employers for violations of these laws in Massachusetts and Oregon, and the California Attorney General can enforce the law on employees’ behalf.
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The question of whether an individual is an “employee” or an “independent contractor” determines whether or not they enjoy the protection of a wide range of employment laws at the city, state, and federal levels. Employees of covered employers are protected by laws related to minimum wage, overtime pay, and other matters. Independent contractors, however, are generally considered to be self-employed, and in a mere contractual relationship with the employer. Employers clearly have an interest in classifying people as independent contractors whenever possible, but some workers have begun to push back. One place where this is occurring is among the cheerleading squads of professional football teams, who claim that they are employees of the teams, not independent contractors. Multiple lawsuits, including one in New Jersey, are asserting claims for wage violations, and a bill pending in the California Legislature would formally grant “employee” status to professional sports team cheerleaders.

A putative class action filed in a New Jersey court alleges that the New York Jets football team underpays its cheerleading squad. Krystal C. v. New York Jets LLC, No. L-004282-14, complaint (N.J. Super. Ct., Bergen Co., May 6, 2014). The plaintiff alleges that the team entered into an “Employment Agreement” with her, identifying them as “Employer” and “Employee,” respectively. She claims that she was paid $150 per game at which she performed, and $100 for each team-sponsored “outside event” sponsored by the team at which she was present on the team’s behalf. The amount of work required of her, however, was allegedly so extensive that it rendered the pay she actually received substantially lower than the state minimum wage, often as little as $3.77 per hour.

The plaintiff in Krystal C. does not directly raise the question of misclassification in her complaint, but her factual allegations depict a level of control over the cheerleaders’ work duties that fits the legal definition of an employer-employee relationship. The claimed class consists of current and former cheerleaders for the Jets employed within two years of the date she filed the complaint. She is claiming violations of the New Jersey Wage and Hour Law, N.J. Rev. Stat. § 34:11-56a et seq., and is asking the court to award all wrongfully withheld pay to the class members. As of early May 2015, the case is still pending in a New Jersey Superior Court.
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Numerous laws at the federal, state, and city levels protect employees from a wide range of adverse acts by employers, including discrimination, harassment, withholding of pay, and unreasonable or excessive work hours. Whether the remedies offered by a particular law are available to you depends on two factors: whether your employer is an “employer” within the meaning of this specific law, and whether you are considered an “employee” or an “independent contractor.” The definitions of “employee” and “independent contractor” vary from one state to another, but they are critically important to assessing a potential employment law claim. Many laws are limited to employers with a minimum number of employees. The definition of “employee” in a given situation, by determining how many employees an employer has, could also determine whether or not it is subject to certain employment statutes. As more and more employers seem to be trying to classify workers as independent contractors, and more and more workers are fighting back in court, understanding the distinction between “employee” and “independent contractor” is extremely important.

Some employment laws limit their application based on a minimum number of employees or other factors. The federal Family and Medical Leave Act (FMLA), for example, only applies to employers with 50 full-time employees or more. 29 U.S.C. § 2611(4)(A)(i). New Jersey’s employment statutes have broader applicability within the state. The Wage and Hour Law, which covers the minimum wage and other matters, does not limit its application based on the employer. Certain provisions, however, do not apply to minors and workers in certain specific occupations. N.J. Rev. Stat. § 34:11-56a30.

Employment statutes do not offer particularly helpful definitions of “employee,” as opposed to “independent contractor.” The New Jersey Wage Payment Law, for example, simply defines an employee as “any person suffered or permitted to work by an employer” who is not an independent contractor or subcontractor. N.J. Rev. Stat. § 34:11-4.1(b). The U.S. Supreme Court noted that a federal statute’s definition of “employee” was “completely circular and explain[ed] nothing.” Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323 (1992). It held that “traditional agency principles” should apply and used a multi-part test to determine whether the plaintiff was an “employee” that primarily looked at “the hiring party’s right to control the manner and means by which the product is accomplished.” Id., quoting Commun. for Creative Non-Violence v. Reid, 490 U.S. 730, 751 (1989).
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The New York Attorney General (AG) has obtained about $3.8 million in judgments and settlements from multiple pizza franchise operators in recent months for violations of state minimum wage and overtime laws. This includes judgments against two companies that operate Papa John’s pizza delivery businesses and settlements with five Domino’s franchisees. Many state attorneys general pursue civil claims against employers for wage violations, but state and federal laws also allow employees to file suit themselves.

Under the federal Fair Labor Standards Act (FLSA), the minimum wage is $7.25 per hour. 29 U.S.C. § 206(a)(1)(C). New York’s minimum wage is $8.75 per hour as of December 31, 2014. N.Y. Lab. L. § 652. The FLSA requires overtime pay equal to one-and-a-half times the wage of covered employees for hours worked in excess of 40 hours in a week, or 80 hours in a two-week pay period. 29 U.S.C. § 207. New York law follows the FLSA.

The AG filed suit against a Papa John’s franchisee and its two owners in December 2014 for a wide range of alleged wage violations, including under-reporting and rounding down employee hours to avoid paying overtime. New York v. Emstar Pizza, Inc., et al., No. 017345/2014 (N.Y. Sup. Ct., Kings Co.) The lawsuit claimed that various illegal wage practices had been going on for at least six years at the defendants’ six locations. The AG’s Labor Bureau reportedly found that employee paychecks were sometimes short by hundreds of dollars due to under-reporting of hours, failure to pay overtime, and lack of accurate payroll records.
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A woman who worked as a nanny for a famous singer at her home in New York City filed suit earlier this year for alleged wage law violations. DaCosta v. Carey, et al., No. 1:15-cv-00596, complaint (S.D.N.Y., Jan. 28, 2015). The plaintiff claims that the defendant required her to work 100 or more hours per week without paying overtime. She is asserting claims under the federal Fair Labor Standard Act (FLSA), 29 U.S.C. § 201 et seq., the Domestic Workers’ Bill of Rights (DWBR), and the New York Labor Law.

The plaintiff worked as a full-time, live-in nanny for the twin children of the defendants, singer Mariah Carey and actor/rapper Nick Cannon. The plaintiff’s duties included caring for the children at the defendants’ New York City home and on Carey’s musical and appearance tours. She accompanied Carey and the children on trips all over the world, she states in her complaint, caring for the children during flights and at other times.

The plaintiff claims that she “spent a significant amount of time responding to [the defendants’] or their agents’ inquiries” regarding the children. DaCosta, complaint at 4. She routinely worked more than 40 hours in a week, and she claims that she often worked more than 100 hours per week, since she was essentially always on call. Carey allegedly called the plaintiff “at hours in the middle of the night” to demand that the plaintiff give her updates or bring her to the children, and she “would not tolerate any delay.” Id. at 5. The plaintiff received pay of $3,000 to $3,600 twice a month, paid by a limited liability company (LLC) of which Carey was a member, and distributed by a management company that reportedly represented Carey. In addition to Carey and Cannon, the complaint names the LLC and the management company as defendants.
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The plaintiffs in a putative collective action under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., have settled their dispute with the defendants, which included allegations of misclassification and failure to pay overtime wages. A federal magistrate recommended approval of a settlement in which the defendants agreed to pay $2.3 million to the plaintiffs. Jones, et al v. JGC Dallas LLC, et al, No. 3:11-cv-02743, findings, conclusions, and recommendation (N.D. Tex., Nov, 12, 2014). The district court approved the settlement, with some adjustments, on December 24, 2014.

The initial plaintiffs in Jones worked for clubs owned and operated by the defendant throughout Texas and in Phoenix, Arizona. They added additional club owners in several amended complaints. They alleged that their primary job duties were to dance on stage and to perform individual dances for customers. They received no payment from the defendants, but instead had to pay a fee to the defendants for each shift. The defendants also allegedly required them to share the money they received from customers with other employees, such as managers and DJs. The defendants set the rates for all of the services expected of the plaintiffs.

The lawsuit was one of many brought by people, mostly women, who work or have worked as exotic dancers at clubs around the country, claiming that the clubs misclassified them as independent contractors instead of employees in violation of the FLSA. Employees are subject to the FLSA’s protections regarding wages and hours of work, while independent contractors are not. Courts around the country have reached different conclusions regarding whether exotic dancers are independent contractors or employees, although the trend seems to be in favor of considering them employees.
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The New York State Attorney General (AG) filed a lawsuit against a Manhattan pizza franchisee, alleging that it underpaid hundreds of delivery workers by about $1 million. New York v. New Majority Holdings, LLC, et al., No. 452487/2014, verif. pet. (N.Y. Sup. Ct., N.Y. Co., Oct. 16, 2014). The lawsuit claims that the company did not pay its delivery employees for the actual amount of hours they worked, did not compensate them for job-related expenses, and “shaved” hours off their timesheets and paychecks. It seeks about $2 million in liquidated damages, statutory damages, and restitution for underpayment of wages.

Federal law currently sets the minimum wage at $7.25 per hour, 29 U.S.C. § 206(a)(1)(C), and states may establish higher minimum wages. In the state of New York, the minimum wage increased from the federal level to $8.00 per hour at the end of 2013, N.Y. Labor Law § 652. It will increase to $8.75 per hour at the end of 2014, and to $9.00 one year later. New Jersey’s minimum wage is currently $8.25 per hour, and it will increase to $8.38 on January 1, 2015. N.J. Rev. Stat. § 34:11-56a4.

State and federal law requires employers to pay hourly workers at one-and-one-half times their hourly rate if they work more than 40 hours in a week. See, e.g. 29 U.S.C. § 207. A common wage violation involves an employer who requires workers to perform duties outside of the time when they are “on the clock.” If this additional time is taken into account, the amount of wages paid to the worker might be less than the minimum hourly wage, or the worker might be entitled to overtime pay.
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Employees of numerous major fast-food restaurant chains have mounted campaigns to improve their working conditions, including higher wages and fewer unpaid hours. A major hurdle for these campaigns has been the franchise model used by many chain restaurants, in which one company, the “franchisor,” owns the restaurant’s brand, logo, menu, and other intellectual property, while other companies, “franchisees,” operate the actual restaurants. This has created what has been called the “fissured workplace,” since it often limits any legal claims employees can make to the franchisee that operates the restaurant where they work. The General Counsel of the National Labor Relations Board (NLRB), however, recently announced that it will treat McDonald’s USA, LLC, the franchisor of McDonald’s restaurants, and its franchisees as “joint employers.” This means that employees may file complaints against both the individual franchisee that employs them and the franchisor.

In a franchise system, a franchisor enters into agreements with franchisees to operate one or more business locations. The franchise agreement includes various requirements that the franchisees must follow related to branding, marketing, and business operations. Employment issues are often left to the individual franchisees, at least according to the written agreements. Since workers at individual business locations are employed by a franchisee, they cannot assert claims directly against the franchisor. A major criticism of this system is that the terms of franchise agreements have expanded in scope, to the point that they often have direct effects on employment matters. The franchisors, however, remain shielded from liability to the franchisees’ employees.

The NLRB’s Office of the General Counsel (OGC) decided in July 2014 to allow workers to file complaints against both their employer and the national franchisor. At the time of this announcement, the NLRB had received 181 complaints against McDonald’s franchisees since November 2012. While 64 complaints were still under investigation, it had already found 43 of them to have merit. If the NLRB is unable to settle the meritorious complaints, it may file lawsuits naming the individual franchisees and the franchisor as defendants.
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A U.S. district judge in California rejected a proposed settlement in a class action lawsuit that accuses multiple technology companies of colluding to suppress wages, saying that “the total settlement amount falls below the range of reasonableness.” In re High-Tech Employee Antitrust Litigation, No. 5:11-cv-02509, order at 6 (N.D. Cal., Aug. 8, 2014). The proposed settlement agreement with the defendants Adobe, Apple, Google, and Intel included over $300 million in damages, far short of the $9 billion in damages estimated by the defendants earlier this year. The plaintiffs originally filed suit in California state court for alleged violations of state antitrust law. After the defendants removed the case to federal court, they amended the complaint to add a cause of action under the federal Sherman Act, 15 U.S.C. § 1 et seq.

The plaintiffs are employees of major technology companies, including the four parties to the proposed settlement as well as Intuit, Lucasfilm, and Pixar. The U.S. Department of Justice (DOJ) began investigating many of these companies in 2009, based on allegations that they had entered into agreements with each other not to recruit or hire each other’s employees. The purpose of these schemes was to avoid competition for employees and thereby keep salaries low. As the Wall Street Journal noted at the time, hiring a competitor’s employees, sometimes known as “poaching,” is common in the technology industry. In 2010, the DOJ settled its claims against many of the companies named in the current lawsuit, but the settlement did not include compensation or damages for employees affected by the schemes.

Five software engineers filed suit against the defendants in Alameda County Superior Court in May 2011. The defendants removed the case to federal court several weeks later, and in September 2011 the plaintiffs amended the complaint to include federal antitrust claims. The lawsuit alleged a class of salaried employees who worked for the defendants during the time period from 2005 through 2009, but not retail employees or corporate officers or directors.
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