Significant Challenges in Wage and Hour Lawsuits

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WAGE AND HOUR

WAGE AND HOUR

UPDATE

UPDATE

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

Continued Class Action Wage and Hour Litigation



Heightened Personal Liability Risks



Increase in New York Minimum Wage



Amendments to the “White Collar Exemptions”



Loss of Federal Companionship and Live-In

Domestic Exemptions



Worker Misclassification – New Guidance and

Continued Complication



Compensation Pitfalls for Non-Exempt Employees

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

Plaintiffs’ attorneys continue to aggressively

pursue class action wage and hour claims



Year over year, federal wage and hour lawsuits

filed in federal courts continue to increase.  As of

September 2014, wage and hour filings

increased from 7,500 to 8,160 per year (almost

a 9% increase).



The 8,160 figure appears to be an all-time high

for FLSA filings. It is the highest annual number

registered in more than 20 years, according to

statistics that go back to 1993, when 1,457 FLSA

cases were commenced.

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

Irizarry v. Catsimatidis 

(2d Cir. 2013).



Catsimatidis was chairman, president, and CEO of Gristede’s

Foods, Inc.  He exercised little, if any, direct day-to-day control over

employees, yet the Second Circuit found that he was personally

liable to his employees for the company’s wage liability.



The Second Circuit began its opinion by noting that most circuit

courts have held that a company owner, president, or stockholder

must have at least some degree of involvement in the way the

company interacts with employees to be considered an FLSA

“employer.”



According to the Second Circuit, to be an “employer,” an individual

must possess control over a company’s actual “operations” in a

manner that relates to a plaintiff’s employment.  There must be

some degree of individual involvement in a company in a manner

that affects employment-related factors, such as workplace

conditions and operations, personnel, or compensation.

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

Irizarry v. Catsimatidis 

(2d Cir. 2013).



The court emphasized that nothing in the FLSA requires an individual to

have been personally complicit in FLSA violations before he or she can

be held personally liable.



Instead, the court noted that an individual could be held personally liable

in two ways: (a) through evidence indicating that individual’s direct

control over the employees; 

or

 (b) through evidence showing an

individual’s authority over management, supervision, and oversight of a

company’s affairs in general as such is relevant to the individual’s

“operational control” of the company’s employment of employees.



According to the court, a person exercises “operational control” over

employees if his or her role within the company, and the decisions it

entails, 

directly affect the nature or conditions of the employees’

employment

.



The court held that “operational control” need not be exercised

constantly to support a finding of personal liability.  Control may be

restricted, or exercised only occasionally, and still support a finding of

personal liability.

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

NY Business Corporation Law Section 630



The top ten shareholders of private New York

corporations are jointly and severally personally liable

for all debts, wages, or salaries due to employees.



NY Limited Liability Company Law Section 609(c)



Effective February 25, 2015, the top ten members of

private New York LLCs are jointly and severally

personally liable for all debts, wages, or salaries due to

employees.



Before an employee can hold a shareholder or

member personally liable under either law, he or

she must give notice to the shareholder/member

within 180 days of the termination of his or her

employment.

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

Currently, the minimum wage in New York State is $8.75 per

hour.  As of December 31, 2015, it will increase to $9.00 per

hour.



On September 10, 2015, Acting Commissioner of Labor, Mario

Musolino, signed an order significantly increasing the minimum

wage of “fast food employees” in “fast food establishments” in

New York State.  The wage increase will be phased in as

follows:

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$10.50 on December 31, 2015



$12.00 on December 31, 2016



$13.50 on December 31, 2017, and



$15.00 on December 31, 2018



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

$9.75 on December 31, 2015



$10.75 on December 31, 2016



$11.75 on December 31, 2017



$12.75 on December 31, 2018



$13.75 on December 31, 2019



$14.50 on December 31, 2020, and



$15.00 on July 1, 2021.

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

On the same date, Governor Cuomo announced that he

wants to raise New York’s minimum wage for all workers

to $15 per hour, which would make it the highest in the

nation. A statement issued by the Governor’s office stated

that it will endeavor to build support for a new minimum

wage bill in the coming months, and that the bill would be

introduced in the next legislative session.



Federal contractors and subcontractors: $10.10 per hour

beginning January 1, 2015 for employees working on or in

connection with covered federal contracts.  Beginning

January 1, 2016, and annually thereafter, this rate will be

determined by the Secretary of Labor.  The DOL has

already given notice that the rate, beginning January 1,

2016, will increase to $10.15.

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

On March 13, 2014, President Obama issued a

Presidential Memorandum directing the Secretary

of Labor to update the regulations governing the

“white collar” overtime exemptions, and consider

how they could be revised to:



Update existing protections to be consistent with the

intention of the Fair Labor Standards Act.



Address the changing nature of the American

workplace.



Simplify the overtime rules to make them easier for

both workers and businesses to understand and apply.

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

On June 30, 2015, the U.S. Department of Labor

released its proposed rule that would amend the

“white collar” exemptions.



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

For New York employers, the current minimum salary level

for administrative and executive employees is $656.25 per

week ($34,125 per year).

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

Additionally, the DOL has proposed indexing these

minimum salary levels to either wage growth or

inflation, and adjusting them annually.



Specifically, the DOL is considering indexing the

minimum salary level for executive, administrative,

professional, and computer employees to the 40th

percentile of earnings for full-time salaried workers, and

to the 90th percentile for highly compensated

employees.



Alternatively, the DOL is considering indexing these

minimum salary levels to the consumer price index for

urban consumers (CPI-U).

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

Interestingly, the proposed rule does not seek to

amend the duties tests applicable to the white collar

exemptions.



Instead, the DOL is seeking public comment on

whether the duties tests are working as intended to

screen out employees who it does not believe are

bona fide exempt employees.



The DOL expressed concern that, in some

circumstances, the current duties tests allow

employees to be classified as exempt where they are

performing “a disproportionate amount" of nonexempt

work.

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

The DOL stated that it would not extend the time for

interested parties and stakeholders to file comments,

and true to its word, the 60-Day comment period closed

on September 4, 2015.



The DOL received 247,064 timely comments (an

additional 42,856 have been submitted after the

deadline, for a total of 289,920). In 2004, the DOL

received about 75,000 comments.



The DOL is aiming to have these changes become

effective first quarter 2016. In 2004, the DOL took 13

months to review the comments its received.



The DOL estimates that, as a result of these changes,

4.68 million employees who are currently treated as

overtime exempt will, without intervening action by their

employers, become eligible for overtime pay in the first

year the rule is in effect.

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

Federal Minimum Salary Level

: Currently, $455

per week for employees to qualify for the

administrative, professional, and executive

exemptions.



New York Minimum Salary Level

: Currently,

$656.25 per week for employees to qualify for

the executive and administrative exemptions. On

December 31, 2015, this will increase to

$675.00 per week.

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

Being paid on a “salary basis” means an

employee regularly receives a predetermined

amount of compensation each pay period on a

weekly, or less frequent, basis.  The

predetermined amount cannot be reduced

because of variations in the quality or quantity of

the employee’s work.



Subject to certain exceptions, an exempt

employee must receive the full salary for any

week in which the employee performs any work,

regardless of the number of days or hours

worked.

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

An employee is not paid on a salary basis if

deductions from the predetermined salary are

made for absences occasioned by the employer

or by the operating requirements of the

businesses.



If the employee is ready, willing and able to

work, deductions may not be made for time

when work in not available.

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

An exempt employee’s salary may be reduced without losing the

exemption for the following reasons:



Absences of 

one or more full days 

due to:



Personal reasons other than sickness or disability;



Sickness or disability if the deduction is made in accordance with a

bona fide plan, policy, or practice of providing compensation for salary

lost due to illness;



Unpaid leave days taken before becoming eligible to receive paid leave

or after exhausting paid leave entitlements under the benefit plan; or



Unpaid disciplinary suspension for violation of written workplace

conduct rules.



Penalties imposed for infractions of significant safety rules.



Deductions to offset 

amounts

 employees receive as jury or witness fees, or

for military pay.



Days/hours not worked during initial and terminal weeks of employment.



Days/hours not worked while on unpaid leave under the Family and

Medical Leave Act.



Deductions from Leave Banks.  Full- or partial-day deductions from leave

banks, paid time-off plans, and other leave accruals are permitted to be

made for any absence, provided such deductions have no impact on the

employee’s salary.

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

Deduction for a partial-day absence to attend a

parent-teacher conference



Deduction of a day of pay because the employer

was closed due to inclement weather



Deduction of three days of pay because the

employee was absent from work for jury duty,

rather than merely offsetting any amount

received as payment for the jury duty



Deduction for a two day absence due to a minor

illness when the employer does not provide

wage replacement benefits for such absences

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

An “actual practice” of making impermissible

deductions from salary will result in the loss of the

exemption:



During the time period in which improper deductions were made



For employees in the same job classifications



Working for the same managers responsible for the actual

improper deductions



Factors considered in determining whether an

“actual practice” exist include:



The number of improper deductions, particularly as compared to

the number of employee infractions warranting deductions



Time period during which improper deductions were made



Number and geographic location of affected employees and

responsible managers



Whether employer has a clearly communicated policy permitting

or prohibiting improper deductions

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

The exemption will not be lost if the employer:



Has a clearly communicated policy prohibiting

improper deductions and including a complaint

mechanism;



Reimburses employees for any improper deductions;

and



Makes a good faith commitment to comply in the

future



Unless

 the employer willfully violates the policy

by continuing to make improper deductions after

receiving employee complaints

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

The following actions generally do not impact an

employee’s exempt status:



Making deductions from exempt employees accrued

leave accounts



Requiring exempt employees to keep track of and record

their hours worked



Requiring exempt employees to work a specified

schedule



Implementing bona fide, across-the-board schedule

changes

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

To qualify for the administrative exemption in New

York:



The employee must be compensated on a salary or fee

basis at a rate of not less than $656.25 per week;



The employee’s primary duty must be the performance of

office or non-manual work that is directly related to the

management or general business operations of the

employer or the employer’s customers; and



The employee’s primary duty must include the exercise

of discretion and independent judgment with respect to

matters of significance.

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

An office/administrative employee does not perform

work that requires sufficient “discretion and

independent judgment with respect to matters of

significance” to be considered an exempt

administrative employee.



An employer relies on the administrative exemption

for an employee who performs “production” work

(i.e., work directly related to the very goods or

services that the employer exists to produce and/or

sell).  

See Whalen v. J.P. Morgan Chase 

(2d Cir.

2009) (holding that bank underwriters were non-

exempt as they performed “production” work).

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

To qualify for the professional exemption,



The employee must be compensated on a salary or

fee basis at a rate note less than $455 per week;

and



The employee’s primary duty must be the

performance of work requiring:



Advanced knowledge (which is work that is predominantly

intellectual in character and includes the consistent

exercise of discretion and judgment) in a field of science or

learning customarily acquired by a prolonged course of

specialized intellectual instruction; or



Invention, imagination, originality, or talent in a recognized

field of artistic or creative endeavor.

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s

s

i

o

n

a

l

E

x

e

m

p

t

i

o

n



Position is not in one of the “professions” where

specialized academic training is a standard

prerequisite for entrance into the field.



Primary duty involves performance of work that

does 

not

 require advanced knowledge in a field of

science or learning customarily acquired by a

prolonged course of specialized instruction



The job is learned through on-the-job training and

not through prolonged course of specialized

instruction

E

x

e

c

u

t

i

v

e

E

x

e

m

p

t

i

o

n



To qualify for the executive exemption in New York:



The employee must be compensated on a salary basis at

a rate of not less than $656.25 per week;



The employee’s primary duty must be management of

the enterprise or a customarily recognized department or

subdivision thereof;



The employee must customarily and regularly direct the

work of 2 or more full-time employees (or their

equivalents); and



The employee must have the authority to hire or fire

other employees, or to make suggestions or

recommendations that are given particular weight as to

the hiring, firing, advancement, promotion, or other

change in status of other employees.

C

o

m

m

o

n

i

s

s

u

e

s

w

i

t

h

t

h

e

E

x

e

c

u

t

i

v

e

E

x

e

m

p

t

i

o

n



Working supervisors.  The question becomes

whether the employee’s “primary duty” is

management of the enterprise (or a customarily

recognized department or subdivision thereof) or

the productive work that he or she performs.



Two or more employees taking credit for

directing the work of the same group of

employees.



Not ensuring that employees executive

supervises work at least 80 hours each week.

E

l

i

m

i

n

a

t

i

o

n

o

f

t

h

e

F

e

d

e

r

a

l

C

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p

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n

i

o

n

s

h

i

p

a

n

d

L

i

v

e

-

I

n

D

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s

t

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e

E

x

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m

p

t

i

o

n

s

F

i

n

a

l

R

u

l

e

E

l

i

m

i

n

a

t

i

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g

t

h

e

C

o

m

p

a

n

i

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s

h

i

p

&

L

i

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e

-

I

n

D

o

m

e

s

t

i

c

S

e

r

v

i

c

e

E

x

e

m

p

t

i

o

n

s



On October 1, 2013, the Department of Labor

promulgated a Final Rule that made a number of

important changes to the companionship and live-in

domestic service exemptions under the FLSA.  Most

notably, the Final Rule eliminated these exemptions for

“third-party providers” of home care services.



As a result of this change, home care agencies that

employ  home health aides will be required pay overtime

at the rate of 1.5 times each aide’s “regular rate of pay,”

rather than 1.5 times the minimum wage.



The Final Rule does not change the DOL’s regulations

regarding “hours worked” by employees during travel

time, sleeping, meal periods, and time spent waiting.

F

i

n

a

l

R

u

l

e

L

i

t

i

g

a

t

i

o

n



In 

Home Care Association of America v. Weil

, a

number of home care industry groups challenged the

Final Rule.



On December 22, 2014, the U.S. District Court for

the District of Columbia vacated the third-party

provider section of the Final Rule, thereby allowing

“third party providers” to continue to rely upon the

companionship and domestic service exemptions.



On August 21, 2015, the U.S. Court of Appeals for

the D.C. Circuit reversed the District Court’s ruling,

unanimously upholding the validity of the Rule.

F

i

n

a

l

R

u

l

e

E

f

f

e

c

t

i

v

e

D

a

t

e



The Department of Labor has made clear that it will not

begin enforcement of the Final Rule until the Court of

Appeals issues a mandate (in this case, by default, the

mandate should issue 52 days after the Court of Appeals

decision).



But the Department has now filed an application to

expedite the issuance of mandate and simultaneously

promised not to enforce to enforce the Final Rule until 30

days thereafter.



Meanwhile, the home care industry litigants that

challenged the Rule have applied for a stay of the

mandate until the Supreme Court decides whether to

hear an appeal of the case.



What about risks of private litigation

?

F

i

n

a

l

R

u

l

e

–

M

o

v

i

n

g

F

o

r

w

a

r

d



While possible, it is statistically unlikely that the

Supreme Court will agree to hear the industry

groups’ appeal.



Absent further regulatory, legislative or judicial

action, home health agencies must be prepared

to pay home health aides overtime at 1.5 times

their regular rate of pay (rather than 1.5 times

minimum wage).

W

o

r

k

e

r

M

i

s

c

l

a

s

s

i

f

i

c

a

t

i

o

n

N

e

w

U

S

D

O

L

W

o

r

k

e

r

M

i

s

c

l

a

s

s

i

f

i

c

a

t

i

o

n

M

e

m

o



On July 15, 2015, David Weil, the Administrator of the

U.S. Department of Labor, Wage and Hour Division,

issued a highly anticipated Administrator’s

Interpretation that provides insight into the DOL’s

current thinking on the question of whether a worker

is an employee or independent contractor under the

FLSA.



The DOL confirmed that it utilizes a broad “economic

realities” test to determine whether workers are

employees for wage and hour purposes – the

common law direction and control test is 

not

 applied.



According to Administrator Weil, the DOL will

“continue to work with the IRS and 22 states on this

issue in a variety of ways – through, for example,

information sharing and coordinated enforcement

.”

N

e

w

U

S

D

O

L

W

o

r

k

e

r

M

i

s

c

l

a

s

s

i

f

i

c

a

t

i

o

n

M

e

m

o



Businesses should expect that the DOL will utilize the

economic realities test, as articulated in the Interpretation,

when examining whether workers are properly classified.



T

h

e

I

n

t

e

r

p

r

e

t

a

t

i

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e

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t

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i

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e

“

n

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o

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o

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p

l

a

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t

s

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f

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o

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e

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s

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m

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f

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a

t

“

m

o

s

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w

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e

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s

a

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m

p

l

o

y

e

e

s

u

n

d

e

r

t

h

e

F

L

S

A

.

”



Businesses that proactively address worker classification

issues can often achieve far better outcomes than those

who find themselves defending individual or class claims

or under audit.

O

t

h

e

r

W

o

r

k

e

r

M

i

s

c

l

a

s

s

i

f

i

c

a

t

i

o

n

D

e

v

e

l

o

p

m

e

n

t

s



The New York Joint Enforcement Task Force on Employee

Misclassification identified nearly 26,000 misclassified employees,

discovered nearly $316 million in unreported wages and assessed

almost $8.8 million in additional unemployment insurance

contributions.



Since its inception, the Task Force has conducted 290 joint

enforcements sweeps, which have uncovered about 10,300

misclassified workers and $52 million in unreported wages.  The

Task Force is sharing sweep results with the New York Department

of Taxation and Finance and the Internal Revenue Service.



Also, President Obama’s proposed 2016 budget reaffirms the Wage

and Hour Division’s focus on detecting and penalizing worker

misclassification.  One of its “Key Enforcement Initiatives” for 2015 is

addressing the “fissured workplace,” which is another term for

independent contractor relationships and other business models that

treat workers as non-employees.  The WHD will target industries

where the “fissured workplace” is regarded as prevalent (e.g.,

janitorial, construction, home health care, nursing, staffing,

transportation and trucking, security, restaurants, hotel, oil and gas).

T

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e

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o

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s

e

q

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o

f

W

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c

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t

i

o

n

:

C

r

i

m

i

n

a

l

R

i

s

k

s



Criminal Risks – Can Arise at Both Federal and

State Level



Federal Criminal Risks



Monetary Fine



Imprisonment



Criminal liability for certain responsible owners, corporate

officers, and employees



State Criminal Risks



Criminal penalties vary from state to state



In New York State criminal risks include

o

Monetary Fines

o

Imprisonment

o

Specific penalties provided for in certain industries (e.g., penalties

under Construction Industry Fair Play Act)

43

T

h

e

C

o

n

s

e

q

u

e

n

c

e

s

o

f

W

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r

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e

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M

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c

l

a

s

s

i

f

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c

a

t

i

o

n

:

T

a

x

e

s

a

n

d

P

e

n

a

l

t

i

e

s



Liability for unpaid taxes



Businesses may be liable for a variety of back-taxes

due to misclassification including:



Income Taxes



FICA



FUTA



State Unemployment Taxes



In addition to owing unpaid monies, businesses may

also be liable for interest and/or penalties on these

taxes

44

T

h

e

C

o

n

s

e

q

u

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n

c

e

s

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f

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:

W

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w

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R

i

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k

s



IRS Whistleblower Program



Applies to claims of tax liabilities over $2 million or against individual

taxpayers with incomes exceeding $200,000



Applies to all tax liabilities, whether based on a mistake or a fraud



Allows whistleblowers to recover between 15% and 30% of the total

amount recovered



New York Whistleblower Program Under the False Claims

Act



Enacted in August 2010



Applied retroactively to claims arising on or after April 1, 2007



Allows  whistleblowers and New York State to sue taxpayers and

anyone who assisted them for treble damages for “knowingly”

submitting false returns where tax loss exceeds $350,000 and the

defendant had income or sales exceeding $1 million in any year



Whistleblowers eligible to receive 15% to 30% of the amounts

recovered, depending upon whether the Attorney General intervenes in

the suit.



Statute of Limitations is 10 years

45

T

h

e

C

o

n

s

e

q

u

e

n

c

e

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o

f

W

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M

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:

P

l

a

i

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t

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f

s

’

L

a

w

s

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t

s



Key wage and hour related risks associated with

using independent contractors may, depending upon

the circumstances, include liability for:



Minimum wage



Overtime



Miscellaneous Wage Liabilities



Call in pay



Spread of hours pay



Spit shift pay

46

T

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e

C

o

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s

e

q

u

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n

c

e

s

O

f

W

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n

:

E

R

I

S

A

/

O

B

A

M

A

C

A

R

E

R

i

s

k

s



ERISA Risks



Misclassified workers may be entitled to benefits under

various employee benefit plans



Improper exclusion of employees from participation in a

qualified plan may result in an operational failure of the

plan



Patient Protection and Affordable Care Act

(“ObamaCare”) Risks.



The “employer mandate” of ObamaCare generally

requires that businesses with 50 or more full-time

employees (or their equivalent) make a certain

affordable level of health insurance available to full-time

employees or face substantial penalties



Employers that misclassify employees as independent

contractors may face annual penalties

47

E

m

p

l

o

y

e

e

V

e

r

s

u

s

I

n

d

e

p

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n

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t

C

o

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t

r

a

c

t

o

r

–

T

h

e

L

e

g

a

l

T

e

s

t

s



Overall Observations



Different laws use different tests



No single factor is dispositive



Rarely is an independent contractor’s classification

certain

48

E

m

p

l

o

y

e

e

V

e

r

s

u

s

I

n

d

e

p

e

n

d

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C

o

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t

r

a

c

t

o

r

–

T

h

e

L

e

g

a

l

T

e

s

t

s



Common Law Direction and Control Test



The Common Law Direction and Control Test is used

to determine whether a worker is an employee for

most tax purposes



IRS had adopted a 20 factor test, but has more

recently grouped factors into three categories:



Behavioral Control



Financial Control



Relationship of parties



Many states agencies across the country apply

variants of the common law test.

49

E

m

p

l

o

y

e

e

V

e

r

s

u

s

I

n

d

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p

e

n

d

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C

o

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t

r

a

c

t

o

r

–

T

h

e

L

e

g

a

l

T

e

s

t

s



Instructions



Training



Hiring, supervision, and

paying assistants



Integration



Services rendered

personally



Continuing relationship



Set hours of work



Full time required



Doing work on employer’s

premises



Order or sequence test



Oral or written reports



Payment by the hour, week,

or month



Payment of business and/or

traveling expenses



Furnishing tolls and

materials



Significant investment



Realization of profit or loss



Working for more than one

firm at a time



Making service available to

the general public



Right to discharge



Right to terminate

50



IRS 20-factor test

E

m

p

l

o

y

e

e

V

e

r

s

u

s

I

n

d

e

p

e

n

d

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n

t

C

o

n

t

r

a

c

t

o

r

–

T

h

e

L

e

g

a

l

T

e

s

t

s



“ABC” Test



The ABC test examines whether workers are:



A – Free from control and direction in performing the job, both

under contract and in fact;



B – Performing services outside of the usual course of

business for the company; and



C – Engaged in an independently established trade,

occupation or business that is similar to the service they

perform.



New York uses the ABC test under the Construction Industry Fair

Play Act and the Commercial Goods Transportation Industry Fair

Play Act (although an independent contractor status can also be

shown under either act by meeting a multi-part “separate

business entity” test).  Other states use as well (e.g., NJ for wage

payment, wage and hour, and unemployment, CT for

unemployment)

51

E

m

p

l

o

y

e

e

V

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r

s

u

s

I

n

d

e

p

e

n

d

e

n

t

C

o

n

t

r

a

c

t

o

r

–

T

h

e

L

e

g

a

l

T

e

s

t

s



Economic Realities Test



This test is used to determine whether a worker is an

employee under the Fair Labor Standards Act

(“FLSA”) and many state wage and hour laws.



Focuses on whether the worker is economically

dependent upon the recipient of the worker’s services

in determining whether he or she is an employee.



Because the focus of this test is whether the worker is

economically dependent on the company, this test is

more likely to yield a finding that the worker is an

employee.

52

E

m

p

l

o

y

e

e

V

e

r

s

u

s

I

n

d

e

p

e

n

d

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t

C

o

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t

r

a

c

t

o

r

–

T

h

e

L

e

g

a

l

T

e

s

t

s



Economic Realities Test – Factors:

>

The extent to which the work performed is an integral part

of the putative employer’s business

>

The worker’s opportunity for profit or loss, depending on

his or her managerial skill

>

The extent of the relative investments of the employer

and the worker

>

Whether the work performed requires special skill and

initiative

>

The permanency of the relationship

>

The degree of control exercised or retained by the

employer.

53

C

o

r

r

e

c

t

i

n

g

W

o

r

k

e

r

M

i

s

c

l

a

s

s

i

f

i

c

a

t

i

o

n



Federal Tax Programs



Section 530 of the Revenue Act of 1978



IRS’ Voluntary Classification Settlement Program

(“VCSP”)



IRS Classification Settlement Program (“CSP”)



Section 3509 of the IRC

54

C

o

r

r

e

c

t

i

n

g

W

o

r

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r

M

i

s

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–

P

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x

A

m

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d

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t

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o

n

P

r

o

g

r

a

m

s



New York State Tax Programs



Voluntary Disclosure Program



Allows taxpayers to correct their failure to properly pay their

taxes



Covers all taxes administered by the Tax Department, including

withholding taxes



Tax Department will not assess any penalties and will not pursue

criminal prosecution



3-year look-back period



Any taxpayer who meets these criteria can participate in the

VDCP, even if their noncompliance was the result of fraudulent

or criminal conduct.



Certain eligibility requirements must be met



Tax Credits available for Taxes Paid by Worker

55

I

n

t

e

r

n

s

&

V

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l

u

n

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r

s

P

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“

I

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r

n

”

C

a

s

e

s

I

n

t

e

r

n

s



Glatt v. Fox Searchlight Pictures, Inc

. 

(S.D.N.Y. June 11,

2013).



Former interns who worked on the production set of the

movie “Black Swan” filed a putative class action contending

they were misclassified as unpaid interns.



Interns obtained documents for personnel files, picked up

paychecks for coworkers, tracked and  reconciled purchase

orders and invoices, traveled to the set to get managers’

signatures, performed basic administrative work such as

drafting cover letters, organizing filing cabinets, making

photocopies, and running errands, and made coffee.



District Court applied the 6-part test and determined that the

interns were employees entitled to minimum wage and

overtime.

I

n

t

e

r

n

s

,

C

o

n

t

.



Wang v. The Hearst Corp

. 

(S.D.N.Y. May 8, 2013).



A group of former interns at Harper’s Bazaar, Cosmopolitan,

Redbook, Esquire, Seventeen, and Marie Claire magazines filed a

class action on behalf of themselves and all other similarly situated

interns that worked for different magazines owned by The Hearst

Corporation.



Interns performed online research, catalogued samples, maintained

the accessories closet, organized files, held casting calls, assisted at

photo shoots, ran errands, updated contact lists, responded to

emails from readers, wrote content, and fact-checked articles.



The district court considered the 6-part test, but also considered

whether the interns or the employer was the “primary beneficiary”

of their services.  Applying this test, the court concluded that the

plaintiffs could be bona fide interns excluded from minimum wage

and overtime protection.

S

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

In 

Glatt v. Fox Searchlight Pictures, Inc. et al

. (2d Cir.

2015) and

 Wang v. Hearst Corp

. (2d Cir. 2015), the

U.S. Court of Appeals for the Second Circuit adopted

a new test to determine whether interns fall outside

the statutory definition of an “employee” for  purposes

of minimum wage and overtime requirements.



The Court rejected the six-part test advanced by the

U.S. Department of Labor and instead adopted a

“

primary beneficiary test

” for evaluating whether

interns should be considered employees.  This is an

important decision for employers in the Second

Circuit who have unpaid internship programs.

N

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

Under this test, the status of an intern turns on “whether the intern or

the employer is the primary beneficiary of the relationship.”



The following 7 (non-exclusive) factors that may be considered when

determining whether a worker is an intern or an employee:



the extent to which the intern and the employer clearly understand that there is

no expectation of compensation;



the extent to which the internship provides training that would be similar to that

which would be given in an educational environment, including the clinical and

other hands-on training provided by educational institutions;



the extent to which the internship is tied to the intern’s formal education

program by integrated coursework or the receipt of academic credit;



the extent to which the internship accommodates the intern’s academic

commitments by corresponding to the academic calendar;



the extent to which the internship’s duration is limited to the period in which the

internship provides the intern with beneficial learning;



the extent to which the intern’s work complements, rather than displaces, the

work of paid employees while providing significant educational benefits to the

intern; and



the extent to which the intern and the employer understand that the internship

is conducted without entitlement to a paid job at the conclusion of the

internship.

V

o

l

u

n

t

e

e

r

s



Generally, individuals may not their volunteer

services for a for-profit enterprise.  So, an

employee cannot “volunteer” to perform services for

his or her for-profit employer, and thus, all time

spent “volunteering” is considered hours worked.



With respect to religious, charitable, and similar

not-for-profit entities, individuals may volunteer their

services, usually on a part-time basis, for public

service, religious, or humanitarian objectives if they

do so without contemplation of pay.

U

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

The U.S. DOL’s regulatory agenda indicates that

the DOL will be publishing a request for

information concerning the use of technology,

including portable electronic devices, by

employees away from the workplace and outside

of scheduled work hours.



The DOL indicated that it is seeking information

concerning portable electronic devices in order to

determine  whether a creation of a new rule is

appropriate and necessary.



The request for information was supposed to be

published in August 2015.

C

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

General Rule

.  Employers must pay all non-

exempt employees 150% of their “regular rate of

pay” for each hour worked in excess of 40 in a

workweek.



Regular Rate

. An employee’s “regular rate” of

pay is normally calculated by dividing the total

pay for employment (except for those payments

expressly excluded) in any workweek (or 14-day

period, as applicable) by the total number of

hours actually worked.

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”



The regular rate includes

: shift premiums or

differentials, nondiscretionary bonuses, payments

for meals, lodging, and facilities, longevity

payments, and retroactive pay increases.



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

Overtime pay violations often occur when employers

:



Fail to pay employees for all hours worked



Fail to pay overtime after 40 hours worked



Fail to count the time spent “on-call”



Fail to include shift differential, bonuses, commissions, or

on-call pay in calculating an employee's regular rate



Fail to pay overtime to non-exempt, salaried employees

(e.g., clerical staff, cooks, and activities directors)



Improperly classifying employees as exempt



Providing compensatory time off instead of paying overtime



Fail to pay overtime to employees who perform exempt

duties but are not paid on a salary basis (e.g., an RN who

is paid hourly)

O

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

An employer must compensate its employees for

work that is not expressly authorized if the

employer 

knew or should have known

 that it was

being performed.



In contrast, an employer is generally not

required to pay for time worked when the

employer did not know, and had no reason to

know, that the work was being performed.

P

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

Under the Portal-to-Portal Act, as it has been

interpreted by the courts, activities that are

preliminary or postliminary to employees’ principal

activities are compensable only if those activities

are both “integral” and “indispensable” to the

“principal activity” for which the worker is employed.



“Indispensable” has been defined as “necessary,”

and “integral” activities have been described as

those “essential to completeness, organically joined

or linked, or composed of constituent parts making

a whole.”

S

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

Less than 24-hour Duty

.  An employee who is required to

be on duty for less than 24 hours is working even though

he or she is permitted to sleep or engage in other

personal activities when not busy.  However, if an

employee is completely relieved from duty (i.e., he or

she is able to use the time effectively for his or her own

purposes) and is able to take a duty-free, uninterrupted

break period of at least 30 minutes in duration (e.g., a

relief employee is provided), the time need not be

compensated.



Duty of 24-hours or More

.  Where an employee is

required to be on duty for 24 hours or more, the

employer and the employee may be able to agree to

exclude bona fide meal periods and bona fide regularly

scheduled sleeping period of not more than 8 hours from

hours worked, provided adequate sleeping facilities are

furnished and the employee receives at least 5 hours of

uninterrupted sleep.

M

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s



General Rule Regarding Compensability

.

Duty-free, uninterrupted meal periods of at

least 30 minutes in duration need not be

compensated as work time.



An employee is not relieved from duty if he

or she is required to perform any duties,

whether active or inactive, while eating.

M

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a

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P

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o

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s



Required Meal Periods in NY



All employees must be provided with an uninterrupted,

duty-free meal period of at least 30 minutes in duration

when they work more than 6 hours and their shift

spans the period from 11 a.m. to 2 p.m.



This meal period must be taken between 11 a.m. and 2 p.m.

and employees must be permitted to leave their workstations.



Employees who work more than 6 hours in a shift that

starts between the hours of 1 p.m. and 6 a.m. must

receive an uninterrupted, duty-free meal period of at

least 30 minutes in duration.



If an employee is employed for a period starting before

11 a.m. and continuing after 7 p.m., he or she must be

provided an additional meal period of at least 20

minutes in duration between the hours of 5 p.m. and 7

p.m.

T

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e



Home-to-Work Travel



Generally not compensable as hours worked when an

employee reports to work at the employee’s regularly

assigned work area.



If a worker travels to the first work site directly from home,

and returns directly home from the final work site, this

travel time generally does not need to be paid.



From Job Site to Job Site (Travel “All in a Day’s Work”)



Compensable.  An employee going from one meeting to

another during the workday must be paid for the travel time

between the meetings.



If the travel is not direct because the employee is relieved

from duty long enough to engage in purely personal

pursuits (e.g., eat, shop), only the time necessary to make

the trip is generally compensable.

T

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l

T

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e



Out-of-Town Travel



Overnight travel away from home community

.  Time

spent traveling, to the extent it cuts across the

employee’s normal working hours, is compensable.

For example, a direct care worker who accompanies a

patient on travel away from home must be paid for all

time spent traveling during the employee’s normal

work hours.



Home-to-Work Travel on special one-day assignment

.

Travel time is generally compensable.

T

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

Attendance at lectures, meetings, training

programs, and 

similar activities

 is generally

considered compensable time, unless all of the

following criteria are met:



Attendance is outside of the employee’s regular

working hours;



Attendance is in fact voluntary;



The course, lecture, or meeting is not directly related

to the employee’s job; 

and



The employee does not perform any productive work

during such attendance.

S

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i

t

-

S

h

i

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t

P

a

y



New York employees are entitled to an

additional hour of pay at the minimum wage rate

for any day where the working hours are not

consecutive.



Working hours are not considered consecutive

where there is an intervening period of more

than one hour during the workday

S

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-

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P

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y



New York employees are entitled to an

additional hour of pay at the minimum wage rate

for any day in which the interval between the

beginning and end of the employee’s workday

exceeds 10 hours.



The interval between the beginning and end of

an employee’s workday includes time off for

meals and intervals off duty.

C

a

l

l

-

I

n

P

a

y



A New York employee who, by request or

permission, reports to work on any day shall be paid

at least 

the lesser of

:



4 hours at the basic minimum wage rate; or



the number of hours in the employee’s “regularly

scheduled shift” at the basic minimum hourly rate.



Call-in pay obligation is different in hospitality

industry.



Call-in pay is due regardless of whether an

employee is “called in” or simply reports for work as

scheduled.  It may be more useful to think of this

requirement as a shift minimum wage which ensures

that employees are paid a set minimum amount for

each day they report for work.



Call-in pay obligation is determined on a workweek

basis.

I

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

All that is required is that the total weekly wages paid

be equal to or greater than the total due for all hours

worked at the minimum wage and overtime rate (as

applicable), plus one additional hour at the minimum

wage for each day in which a “spread” and/or “split”

occurs.



For “call-in” pay, if the amount actually paid to the

employee for the workweek exceeds the total of all

hours worked at the minimum wage and overtime rate

(as applicable), plus any call-in pay owed, no

additional payment for call-in pay is required for that

workweek.



In the hospitality industry, there is no phase-out of

these obligations, even if an employee earns

significantly more than the minimum wage.

N

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Y

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k

L

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s



The NYS DOL is expected to issue regulations that

establish rules for employers that wish to pay wages

to employees via payroll debit cards.



The proposed regulations follow attempts by New

York Attorney General Eric Schneiderman and

legislators to regulate the use of payroll debit cards by

employers.



The regulations would require employers to: (a)

provide specific, advanced disclosures to employees

about the payroll card program; (b) obtain “informed

consent” from employees; and (c) disclose a detailed

list of other mandatory terms and conditions (e.g.,

employees must have access to at least one ATM

network offering no-cost withdrawals).

P

a

y

r

o

l

l

D

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b

i

t

C

a

r

d

s



The majority of these proposed requirements

are a codification of existing DOL requirements

for use of payroll debit cards.  However, the

proposed rules introduce some new

requirements.



For instance, an employee’s consent to pay

wages by payroll debit cards cannot be sought

until 7 business days after a written statement of

program terms is provided to an employee.

R

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m

e

n

d

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s

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P

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C

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s



Prepare compliant notices for employees concerning payroll

debit cards



Train all human resources and payroll personnel to provide

proper notices to employees concerning payroll debit cards,

and secure written and informed consent from employees

before beginning to pay wages via payroll debit cards



Review the terms and conditions associated with the use of

any particular payroll card to ensure that employees will not

incur unauthorized fees when accessing wages



Confirm that payroll card accounts are fully insured, and held at

an institution that has programs to detect, prevent, and mitigate

identity theft



Train staff concerning the anti-retaliation provisions of the

proposed regulations



Review the terms and conditions of all agreements between

the employer and the issuer of  payroll debit cards to ensure

that they are consistent with the terms of the proposed

regulations

L

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b

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r

L

a

w

S

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t

i

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n

1

9

3



Amendments to Section 193 of the Labor Law,

which authorized new forms of deductions, are

scheduled to expire on November 6, 2015



The Legislature and the Department of Labor

have not yet extended the 2012 amendments.



Absent an extension, employers will no longer be

able to make wage deductions to recovery

overpayments or advances.

R

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s



Consider utilizing arbitration agreements with class

action waivers.  Note that the courts and the NLRB

have been at odds with regard to the legality of these

agreements.



Take all audits and investigations seriously from the

outset and adhere to all deadlines.



Carefully consider related issues before settling wage

and hour audits and claims (private claims, tax

ramifications, ACA and benefit plan implications, etc.)



Keep accurate records of employees’ hours of work,

including all meal times.



Conduct an internal wage and hour audit under the

attorney-client privilege to ensure compensation

practices comply with the current statutes, regulations,

and case law.

T

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WAGE AND HOUR

WAGE AND HOUR

UPDATE

UPDATE