How to Avoid Costly Wage & Hour Pitfalls for Hospitality Industry

Employers

Featuring Seyfarth Shaw LLP

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Welcome

Today’s Host

Michelle Lanter Smith

Chief Marketing OfficerEPAY Systems, Inc.mlsmith@EPAYsystems.com773-499-7512

EPAY Systems -- designed to meet the needs of your complex, distributed workforce

• Reduce your labor costs by 5% or more

• Keep you in control and in compliance

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Today’s Discussion

Federal court filings of wage and hour class and collective actions have increased more than 500% since 2000.

Are you at risk?

©2012 Seyfarth Shaw LLP

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Presenting

Jeremy W. StewartAssociate, Seyfarth Shaw LLPLabor & Employmentjwstewart@seyfarth.com(312) 460 - 5662

Jeffrey M. BurnsAssociate, Seyfarth Shaw LLPLabor & employmentjburns@seyfarth.com(617) 946-4944

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Q & A

To ask a question, simply type your question in the “Question” box on the right side of your screen or raise your hand by clicking on the icon next to your name.

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Overview: Trends for 2013

• Litigation trendso Continued aggressive plaintiffs’ bar

• Increased agency enforcement

• Compliance Risks – Surprise!!!

• “Riskiest” times of day.

o Pre & Post Shifto Meal Timeso Travel time

• Simple Safeguards

©2013 Seyfarth Shaw LLP

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National Wage & Hour Litigation Trends

• Aggressive plaintiffs’ law firms have created consortiums, jointly filing class/collective suits

• In recent years, plaintiffs’ firms have employed an industry-specific approach when it comes to wage & hour litigationo One firm successfully targets an

industry and is quickly followed by other plaintiffs’ firms who target other employers in that industry

©2013 Seyfarth Shaw LLP

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National Wage & Hour Litigation Trends

• Aggressive outreach efforts to identify potential plaintiffso Outside companies sending email blasts to

employees of target companieso Ads on Facebook, Twitter

• 7064 lawsuits filed under the Fair Labor Standards Act (“FLSA”) in 2012 o Record high numbero State wage-and-hour actions raise this

number significantlyo Of all state and federal class or collective

actions filed in the U.S., vast majority are wage and hour claims

©2013 Seyfarth Shaw LLP

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Top 10 Private W&H Settlements In 2012

1. $99 Million – Novartis (misclassification of pharma sales reps)

2. $40 Million – Merrill Lynch (wage claims related to merger)

3. $35 Million – H&R Block (timeliness of payments)

4. $21 Million – Rite Aid (misclassification of ass’t store mgs)

5. $20 Million – City of New York (misclassification of police sergeants)

6. $19 Million – Robert Half (misclassification of recruiters)

7. $15.6 Million – HSBC Bank (misclassification of bankers, managers, & specialists)

8. $15.5 Million –Conoco Phillips (failure to provide meal breaks)

9. $14 Million – Family Dollar (misclassification of store managers)

10.$12.9 Million – Spearmint Rhino Cos. Worldwide, Inc. (independent contractor misclassification)

©2013 Seyfarth Shaw LLP

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FLSA Cases in Federal Court, 1993-2012

©2013 Seyfarth Shaw LLP

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WHD Continues To Be Aggressive

• Increase in targeted investigations in low-wage/high risk industries

• Increase in corporate-wide investigations

• Assessment of liquidated damages, penalties, and other sanctions

• Grass Roots Campaign:o Continued push of “Bridge to Justice” and “We Can Help”

Partnering with community and worker organizations to increase employee awareness

Referring certain cases to private attorneys to initiate litigation

©2013 Seyfarth Shaw LLP

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Increased WHD Enforcement Capabilities

©2013 Seyfarth Shaw LLP

Number of Wage and Hour Division Investigators, 1987 to 2011

951 952

970

938

835

804 800809

942 942 938949 945

898

850

788773

751

732

865

781

731

893

950

1,006

600

650

700

750

800

850

900

950

1,000

1,050

1,100

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Applied Econom ic Strategies , us ing U.S. Departm ent of Labor, Wage and Hour Divis ion data.

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Compliance With The FLSA Is Not Easy

• The Fair Labor Standards Act was enacted in 1938o Minimum Wageo Overtimeo Child Labor

• Amended 44 Times

• Well Over 50 Statutory Exemptions

• Over 700 Pages of Regulatory Text

• 14-15 Public Chapters of Field Operations Handbook

• 350+ Opinion Letters Since 2000

• Does Not Preempt State Law

• Generally Cannot Be Overruled by CBA

©2013 Seyfarth Shaw LLP

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Tip Credit Issues

• April 5, 2011--DOL Wage and Hour Division Published Revised Regulations Covering the Tip Credit

• Regulations Became Effective May 5, 2011

• New Regulations Require Employers to Inform Employees Of:o Intent to Take Tip Credito Cash Wage that will be paid by Employero Amount Employer is Using as a Credit Against Tips Receivedo Amount Claimed By Employer As Credit Can’t Exceed Tips

Received o Tip Credit Won’t Apply Unless Employee is Informedo All Tips Must be Retained by Employee Except for Valid Tip Pool

©2013 Seyfarth Shaw LLP

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Mistake

• Assuming employees know a tip credit is being taken.

• Key issues:o Verbal is not likely to be enough – jurisdictions vary, but a

written notice that is signed by all tipped employees and new employees is critical to the defense.

o A lack of notice is enough to lose the tip credit.

©2013 Seyfarth Shaw LLP

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Mistake

• Using tipped workers for non-tipped work.

• Key issues:o Avoid the use of tipped employees for non-

tipped work.o Limit time spent doing general preparation

and maintenance work (not easy to defined distinction in all cases).

o Non-customer facing work is almost never tip generating.

©2013 Seyfarth Shaw LLP

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Tip Pools

• No Maximum Contribution to Tip Poolo Must Notify Employees of Tip Pool Contribution

Requirements

• Best Practices for Compliance:o Notify employees in writing with the specific requirements:

Tip credit will be taken

Wage that will be paid by Employer and amount of tip credit

Amount of tip credit won’t exceed tips actually received

All tips will be retained (except for valid tip pool)

Tip Credit Won’t Apply Unless Employee Informedo Get signatures from employees that they have received

notification

©2013 Seyfarth Shaw LLP

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Mistake

• Including non-tipped employees in the pool.

• Key Issues:o Non-customer facing or interacting positions should be

excluded from the pool.o Managers and supervisors should not be included in the

pool.o The tip pool cannot be used or retained by the company for

its own use or benefit. The pool belongs to the employees.

©2013 Seyfarth Shaw LLP

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Service Charges

Federal law Automatic service charges generally not tips

Portions of service charges distributed to employees cannot be counted as tips for tip credit

Can be counted to satisfy minimum wage obligations

State Law Important differences depending on state

Example: MA, NY & HI: automatic “service charges” may be tips unless patrons informed otherwise Depends on disclosures to patrons Must be distributed only to certain employees

©2013 Seyfarth Shaw LLP

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Other Automatic Charges

Varies by state

Ex., MA, NY & HI: depends on understanding of patron.

How is the charge described to patrons?

Avoid ambiguous terms.

Provide appropriate description of all automatic charges. If charges are not distributed to employees, then say so.

Significant consequences for violations

MA: automatic treble damages, attorneys’ fees, costs

©2013 Seyfarth Shaw LLP

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Meal Periods/Breaks

Federal law

Short rest periods (usually 20 min or less) count as hours worked (including smoking breaks)

Bona fide meal periods generally need not be compensated Employee completely relieved from duty Freedom to leave work station Break location away from work station

• Not relieved if required to perform any duties, active or inactive

No private right of action for break per se – agency enforcement

State Law

©2013 Seyfarth Shaw LLP

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Missed / Interrupted Breaks

Document Reminders Orientation, staff meetings

Schedule Breaks Where Feasible

Impose Staffing Standards & Requirements to Impact Meal/Rest Periods

Watch automated deductions, interruptions, standard time card entries, skipping to make up for tardy, leaving early in lieu of break, no comp time E.g. sign/clock in and out for meal periods

– documented compliance

Review of Time Records

Use of Waivers

©2013 Seyfarth Shaw LLP

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Meal Periods: A Few Simple Safeguards

Implement a policy that only uninterrupted meal periods are unpaid.

Implement a system to allow employees to document if they did not take or did not get their full meal period.

Keep records.

Have employees verify that any time deducted for meal breaks each pay period is accurate.

©2013 Seyfarth Shaw LLP

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Other Common Pay Issues

©2013 Seyfarth Shaw LLP

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Mistake

• Employees have to pay for their own uniforms no matter what.

• Key issues:o Are the uniforms generic or elaborate?o Do employees authorize the deduction?o Does the deduction make their pay fall below minimum wage?o Are they responsible for cleaning the uniform?

©2013 Seyfarth Shaw LLP

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A Few Simple Safeguards

• Receive authorization for the deduction (if required by state law).

• Do not count a uniform as a credit against wages.

• Make sure that the cost of uniform deductions does not reduce pay below minimum wage.

©2013 Seyfarth Shaw LLP

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Mistake

• Requiring individuals to show up at work and wait to clock-in.

• Key Issues:o How long in advance of the shift are they required to

arrive at the job site or central location?o Are employees free to use this time for their own

purposes?o Are they disciplined or prevented from working if they

do not show up at the required time?o Waiting to work- you don’t have to exert yourself to be

working.

©2013 Seyfarth Shaw LLP

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A Few Simple Safeguards

• Only require people to be at work by their scheduled start time.

• If employees are required to be at work by a certain time and employees are there by that time, pay the employees starting at that time.

• Only discipline individuals who are tardy for their scheduled start time, not the early arrival requirement.

©2013 Seyfarth Shaw LLP

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Mistake

• Not including all required time in the calculation of hours worked

• Key issues:o Pay for pre- and post-shift activities (loading/unloading;

donning & doffing; etc.)o Is the activity “integral and indispensable” to employees’

principal work activities (and therefore compensable)?o Do the employer’s rules or the nature of the work require it?o If an employee continues to work voluntarily after the end

of his shift and the employer knows or has reason to know, that time is considered working time

©2013 Seyfarth Shaw LLP

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A Few Simple Safeguards

• Do not let hourly employees start working until they are on the clock (but don’t require them to be there before they are allowed to clock in).

• Pay attention and make sure that people are not working after they clock out.

• Have employees verify each pay period that they have been paid for all time worked.

©2013 Seyfarth Shaw LLP

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Mistake

• Failure to take a strong stand against off-the-clock work

• Key issues:o Failure to properly compensate for all hours

worked = most frequently cited violation by WHD (in terms of numbers of employees affected) in the course of its investigations

o A number of states have recently enacted anti-wage theft laws

©2013 Seyfarth Shaw LLP

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A Few Simple Safeguards

• Implement strong policies and set expectations.

• Train managers to look out for and report off the clock work.

• Train employees on your policies.

©2013 Seyfarth Shaw LLP

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EPAY Systems

Michelle Lanter Smith

Chief Marketing OfficerEPAY Systems, Inc.mlsmith@EPAYsystems.com773-499-7512.

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EPAY -- In Time with You

Uniquely flexible

Mobile workforce,

union contracts,

multiple job assignments?

Complex pay rules?

No problem!

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Reduce your labor costs

Eliminate erroneous pay calculations, time rounding, and management inconsistencies

Eliminate buddy punching

Biometric time clocks with camera and finger print reader

Reduce costs associated with paper checks. Save an average of $2.87 per pay period/per employee.

or more!

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Comp Claims• Did you have an

accident free day?

Minimize Compliance Risk

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• Mobile GPS Webinar: Time Tracking & Mobile Apps. Nov 7: 10:00 am cst

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Register at www.EPAYsystems.com

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Thank You!

Jeremy W. StewartAssociate, Seyfarth Shaw LLPLabor & Employmentjwstewart@seyfarth.com(312) 460 - 5662

Jeffrey M. BurnsAssociate, Seyfarth Shaw LLPLabor & employmentjburns@seyfarth.com(617) 946-4944

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Connect with us

Connect with EPAY on:o LinkedIn – follow our company page at

EPAY Systemso Twitter -- @EPAYsystemso Sign up for our e- newsletter at

EPAYsystems.com

Connect with Seyfarth Shaw LLP:o Wage & Hour Litigation Blog

http://www.wagehourlitigation.com/o Twitter - @SeyfarthShawLLP

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Thank You!