Category: Wage & Hour

March 19, 2020

Congress: Some Employers Must Give Paid COVID-19 Leave

On March 18, 2020, Congress passed and President Trump signed the Families First Coronavirus Response Act. This legislation includes an Emergency Paid Sick Leave Act and amendments to the Family and Medical Leave Act, along with corresponding tax credits. These provisions give some employees the right to up to 12 weeks of paid leave related to the public health emergency caused by the novel coronavirus. These COVID-19 leave entitlements will be in place beginning April 2, 2020, and end December 31, 2020.

Emergency Paid Sick Leave

The Emergency Paid Sick Leave Act gives employees the right to take up to 80 hours (less for part-time employees) for certain COVID-19 related conditions.

This sick leave is in addition to any other sick leave available to employees under employer plans or other laws. Employers cannot require employees to use other forms of paid leave before this emergency paid sick leave.

Covered Employers

The law applies to all public (governmental) employers and private employers with fewer than 500 employees.

However, employers of health care providers or emergency responders can choose to excuse those employees from the sick leave requirements.

The law also gives the Secretary of Labor the right to issue regulations that further limit the coverage, including:

to exclude health care providers and emergency responders; and
to exempt small businesses with fewer than 50 employees from the requirement to provide paid sick leave to employees to care for children whose schools are closed or child care is unavailable.

Hopefully, the Department of Labor will issue any such regulations before April 2nd.

Qualifying Conditions

Employees of covered employees can take sick leave when the employee is:

subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
advised by a health care provider to self-quarantine due to concerns related to COVID-19;
experiencing symptoms of COVID-19 and seeking a medical diagnosis;
caring for an individual who is subject to a quarantine or isolation order;
caring for a son or daughter if their school has been closed or their child care provider is unavailable due to COVID-19 precautions; and
experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Duration of Leave

Full-time employees will be eligible to take up to 80 hours of paid sick leave for the above circumstances.

Part-time employees can take up to the average number of hours they work in two weeks

The law does not clarify who qualifies as a full- vs. part-time employee. However, it seems like anyone who averages 40 hours or more could take up to 80 hours of leave. Employees who average less than that would get the number of hours they average in two weeks.

For part-time employees whose hours vary, employers should calculate the average number of hours the employee was scheduled to work over the past 6-months (dating back from the start of the paid sick time). Or if the employee didn’t work in the past 6 months, use the employee’s reasonable expectation of hours at the time of hiring.

Amount of Pay

Employers must pay employees on paid COVID-19 sick leave based on their “regular rate of pay” under the FLSA (assuming it is above minimum wage). There is some uncertainty about exactly what that would mean in the case of employees who receive compensation beyond base hourly and salary rates. For example, some non-discretionary bonuses and commission payments apparently would need to be factored in.

Employees will receive 100 percent of the lost wages as so determined when the leave is based on the employee’s own health situation (conditions 1-3 above). When the leave is to care for others (conditions 4-6 above), the employee will receive two-thirds of that amount.

Sick leave pay under the law is capped at $511 per day ($5,110 total) when the leave is based on the employee’s own health situation (conditions 1-3 above). The cap is lower, $200 per day ($2,000 total), when the employee needs to care for others (conditions 4-6 above).

Additional Conditions

Before the law takes effect, the Department of Labor will issue a model notice for employers to post. The notice will advise employees of the requirements of the Emergency Paid Sick Leave Act.

Employers who do not provide the required paid sick leave will be liable for the unpaid leave benefits plus additional penalties available for violations of the Fair Labor Standards Act.

Employers may not discriminate against employees who take paid sick leave related to COVID-19 or require employees to find coverage for their shifts.

The law only stays in effect until December 31, 2020. Thus, not surprisingly, there is no carryover of unused paid sick leave. Employers do not have to pay out unused leave under this law upon separation from employment.

Emergency Family and Medical Leave Expansion Act

This legislation temporarily amends the FMLA only until December 31, 2020. While in effect, it provides a combination of paid and unpaid leave related to COVID-19 issues.

Covered Employers

The pre-existing FMLA unpaid leave requirements effectively only apply to employers with at least 50 employees. The new COVID-19 leave provisions will apply to private (non-government) employers with less than 500 employees, as well as all government entities.

The law also gives the Secretary of Labor the right to issue regulations that further limit the coverage, including:

to exclude health care providers and emergency responders; and
to exempt small businesses with fewer than 50 employees when the imposition of the new requirements would jeopardize the viability of the business as a going concern.

It also appears employees generally can’t sue employers with less than 50 employees for coronavirus-related FMLA violations. But the U.S. Department of Labor presumably could still enforce the law against them if it doesn’t adopt an applicable exemption.

Covered Employees

The FMLA has previously only afforded leave to employees who have been employed with their current employer for at least a year. The employee must also have worked for at least 1250 hours in the past 12-months and work within 75 miles of at least 50 other employees of their employer.

The new COVID-19 leave provisions will apply to all employees of covered employers who have been with the organization for at least 30 days.

Note that these amendments do not change the coverage and eligibility requirements for the standard FMLA leave categories.

Employers may choose not to permit employees who are health care providers or emergency responders to take this form of FMLA leave.

New COVID-19 Leave Category

For the rest of 2020, the FMLA will allow up to 12 weeks of leave “because of a qualifying need related to a public health emergency.”

This leave is limited to a situation where an employee is unable to work or telework because of a need to care for their minor child whose school or place of care has been closed or their child care provider is unavailable due to a declared COVID-19 emergency.

Employees who experience coronavirus symptoms or need to care for a family member with a serious health condition related to COVID-19 may still be eligible for leave under pre-existing FMLA provisions. However, they will not qualify under this new category. As a result, they will not be eligible for paid FMLA leave. Nor will they be eligible unless they meet the broader employer and employee coverage requirements that still apply to the other leave circumstances.

Any time taken for this new form of leave will apply toward the 12 weeks of total annual leave that a qualifying employee can take under the FMLA.

Paid FMLA Leave Related to COVID-19

The first two weeks (10 days) of leave taken to care for children out of school can be unpaid. Employees have the right to use any other accrued vacation, personal, medical, or sick leave during that time. In some cases, that will include the new emergency sick leave discussed above.

After the first 10 days, the employer must pay employees for additional leave up to the 12 weeks allowed.

Employers must pay at least two-thirds of the employee’s regular rate of pay (as discussed above regarding paid sick leave). However, the paid FMLA leave cannot exceed $200 per day or $10,000 total for an employee.

Reinstatement Rights

In some cases, employees who take this new form of FMLA leave will have different job restoration rights than those using other types of FMLA leave.

Employers with less than 25 employees do not have to allow an employee to return to work from leave taken to care for children whose schools are closed if:

the position no longer exists due to economic conditions or other changes in operating conditions of the employer that affect employment and are caused by a COVID-19 public health emergency during the leave;
the employer makes reasonable efforts to restore the employee to an equivalent position with equivalent pay and benefits; and
if the employee could not be initially reinstated to an equivalent position, the employer makes reasonable efforts to contact the employee if an equivalent position later becomes available.

Tax Credits

The Families First Coronavirus Response Act includes tax credits to enable private (non-government) employers to recoup their costs of providing these new forms of paid COVID-19 leave.

First, employers will obtain a credit against their quarterly payroll taxes equal to the full amount of wages paid under the Emergency Paid Sick Leave and the Emergency Family and Medical Leave Expansion Act. If the credit exceeds the amount of taxes due from an employer, the employer will receive a refund in the amount of any excess credit. The IRS should issue further guidance regarding these tax credits.

Second, employers will not pay the 6.2% payroll tax on the wages they pay to employees as sick leave or paid family leave to satisfy these new requirements.

Employers should consult with their tax advisors for more details on the potential tax implications in their specific situations.

Next Steps for Employers

Public employers and private employers with less than 500 employees must start planning for compliance with these new requirements by April 2, 2020. If nothing else, most schools are or will be closed between now and then. This reality will give many employees the basis for FMLA leave.

We expect additional guidance from the Department of Labor. One big question is which additional employers and employees will be exempt from coverage. Ideally, we will have these answers before employers must start complying with the law. But employers cannot rely on any delays in regulations to put off compliance.

Eventually, employers will have to post a notice regarding the new paid sick leave requirements. New FMLA notices and other related documents will likely also be necessary. Again, it would be best for the DOL to provide these quickly. However, that might prove challenging under current circumstances.

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February 4, 2020

New York Eliminates Tip Credit for Most Industries

On January 22, 2020, the New York Department of Labor issued a proposed rule toward eliminating the tip credit for employees in most industries. The rule change follows a report in which the Commissioner of Labor recommended this approach. Governor Cuomo endorsed the report’s findings on December 31, 2019. The new rule will modify the State’s Minimum Wage Order for Miscellaneous Industries and Occupations.

The proposed rule is subject to a 60-day public comment period. However, it appears quite likely the Department of Labor will finalize this rule before the initial June 30, 2020 partial implementation date.

Affected Employees

The New York Minimum Wage Order for Miscellaneous Industries and Occupations covers most industries. Limited exceptions include the hospitality industry (restaurants and hotels), building services, and farmworkers.

This rule change does not affect tipped restaurant or hotel workers. But it does generally encompass the following types of positions where employees commonly receive tips:

car wash attendants
nail salon workers
tow truck drivers
dog groomers
wedding planners
tour guides
tennis instructors
valet parking attendants
hairdressers
aesthetician
golf instructors
door persons

Current Tip Credit Allowance

Employers have historically been able to pay such employees below the standard New York minimum wage by relying on a tip credit allowance. To apply a portion of the employee’s tips or gratuities toward satisfying the hourly minimum wage requirement:

The employee’s occupation must be one in which tips have customarily and usually constituted a part of the employee’s remuneration;
The employer must be able to show substantial evidence that the employee has earned at least the amount claimed for the tip credit allowance; and
Any tip credit allowance must be recorded on a weekly as a separate item in the wage record.

Where currently allowed, the amount of the tip credit available to employers depends on the level of tips earned by a particular employee. In each case, there is a “low” and “high” tip credit allowance based on the employee’s weekly average of tips received.

New Tip Credit Rule

Under the new rule the tip credit allowance under the New York Miscellaneous Industries and Occupations Wage Order would be cut in half effective June 30, 2020, Then, as of December 31, 2020, it would be eliminated. Thus, by year end, employers will have to pay full minimum wage without the benefit of any tip credit.

Commissioner of Labor Investigation and Report

The New York Commissioner of Labor has the authority to declare that a policy must be eliminated as rapidly as practicable without substantially curtailing opportunities for employment or earning power. Governor Andrew Cuomo had directed the Commissioner to examine the overall impact of the minimum wage tip credits on employees and employers. The Department of Labor held seven public hearings resulting in approximately 40 hours of testimony, and the Commissioner issued an 11-page “New York State Subminimum Wage Hearing Report and Recommendations.”

The Commissioner’s Report addresses the overall intent behind the project, what action was taken by the Commissioner and his team to investigate the overall impact of the tip credit allowance, the data collected during the investigation, and his recommendations for changes moving forward.

Report Findings

The Commissioner’s Report includes the following findings:

There are at least 70,000 workers in the state of New York that fall under the Miscellaneous Wage Order who likely receive tips.
62% of these employees are female, 41% are non-white, and 27% are Hispanic or Latino.
Tipped workers are twice as likely to be in poverty, with a below-poverty status of 13%–more than two times that of the broader workforce–and are more likely to rely on public assistance.
Tipped workers outside of the hospitality industry are often confused about whether they are entitled to earn minimum wage, leading to wage theft.
The testimony cited lower tipping rates in miscellaneous industries due to tip pooling and a lack of broad public awareness of tipping in these types of businesses.

Report Conclusions

The Commissioner concluded that the existing tip credit language in the Miscellaneous Industry Minimum Wage Order:

allows employers outside of the hospitality industry to employ workers “at wages that are insufficient to provide adequate maintenance for themselves and their families”;
threatens the health and well-being of the people of this state; and
injures the overall economy.

Minimum Wage for Tipped Employees (Non-Hospitality)

The charts below show the 2020 minimum wage requirements for employees covered by the Miscellaneous Industries Minimum Wage Order.

New York City
Effective Date	Minimum Wage	Low Tips ($2.25 to $3.64)	High Tips ($3.65+)
12/31/2019	$15.00	$12.75	$11.05
6/30/2020	$15.00	$13.85	$13.15
12/31/2020	$15.00	$15.00	$15.00

Long Island & Westchester County
Effective Date	Minimum Wage	Low Tips ($1.95 to $3.19)	High Tips ($3.20+)
12/31/2019	$13.00	$11.05	$9.80
6/30/2020	$13.00	$12.00	$11.40
12/31/2020	$14.00	$14.00	$12.50

Remainder of New York State
Effective Date	Minimum Wage	Low Tips ($1.75 to $2.89)	High Tips ($2.90+)
12/31/2019	$11.80	$10.05	$8.90
6/30/2020	$11.80	$10.90	$10.35
12/31/2020	$12.50	$12.50	$12.50

In some parts of the State, the minimum wage will increase again on December 31, 2021. On that date, the minimum wage for Long Island and Westchester will rise to $15.00 per hour. Additional increases for other parts of the state are also likely, but not yet scheduled.

Click here for more details on New York State’s minimum wage rates.

Potential Changes to the Hospitality Tip Credit

This rule change does not apply to individuals employed in the hospitality industry. However, it remains possible that restaurants and hotels will face similar changes in the future.

Several years ago, the Labor Commissioner convened a Hospitality Wage Board to investigate modifications to the required cash wage rates and the allowable credits for tips, meals and lodging for employees in the hospitality industry. In February 2015, based on the Wage Board’s recommendations, the Department of Labor modified tip amounts and criteria for all tipped workers in the hospitality industry. These include food service workers and other restaurant and hotel service employees.

The Hospitality Wage Board found that the tipped employee minimum wage adversely affects “especially low-paid employees, women, and minorities.” It recommended “a complete elimination” of the “subminimum wage” in favor of “a single minimum wage [that] would simplify a complicated system.” However, both restaurants/hotels and their employees have expressed opposition to the elimination of the tip credit for hospitality workers.

Recommendations for Employers in Non-Hospitality Industries

Employers (other than restaurants and hotels) currently taking advantage of the tip wage credit must evaluate their current practices and determine how they intend to comply with the planned changes. In some cases, it may not even be clear whether the hospitality or miscellaneous wage order technically applies. Given the complexity of these regulations, it is critical to carefully review and modify your operations and pay practices as necessary.

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January 17, 2020

U.S. DOL Revises FLSA Joint Employer Standard

On January 13, 2020, the U.S. Department of Labor issued a new rule revising its test for evaluating joint employer status under the Fair Labor Standards Act. Among other situations, joint employer analysis is often critical to work arrangements involving staffing agencies and other outsourcing companies. The FLSA joint employer rule change takes effect on March 16, 2020.

Previous Joint Employer Test

In 2016, the U.S. Department of Labor under the Obama administration issued interpretative guidance that promoted greater scrutiny of joint business relationships. That guidance essentially created a standard whereby employers jointly employ workers whose work for one company “is not completely disassociated” from their work for the other company. This action prompted many businesses to change their traditional business practices for fear of incurring additional and unwanted liability for another party’s employees.

Despite this change in “guidance,” the DOL had not formally changed its joint employer rule since 1958.

Joint Employer Scenarios

The 2020 joint employer rule identifies two possible scenarios where joint employment could exist:

Where the employee has an employer who employs the employee to work, but another person/entity simultaneously benefits from that work.
Where one employer employs a worker for one set of hours in a workweek, and another employer the same worker for a separate set of hours in the same workweek.

The most significant revisions to the DOL’s standard relate to the first of these situations. The most common example arises when one company places its workers at the jobsite of another independent business to perform services. This could be a temporary placement by a staffing agency or a consulting firm, among other arrangements.

New Joint Employer Test

The primary thrust of the rule change lies in a new four-factor balancing test for evaluating joint employer status in the first type of scenario identified above.

The four factors ask whether the potential joint employer:

Hires or fires the employee?
Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree?
Determine the employee’s rate and method of payment?
Maintains the employee’s employment records?

While emphasizing these four factors, the new rule allows that:

“Additional factors may be relevant for determining joint employer status in this scenario, but only if they are indicia of whether the potential joint employer exercises significant control over the terms and conditions of the employee’s work.”

Irrelevant Factors

The rule also specifically disregards the question of whether the employee is “economically dependent” on the potential joint employer. That subject is now expressly irrelevant to liability under the FLSA.

The DOL identifies the following as factors that assess economic dependence and hence cannot be considered:

Whether the employee is in a specialty job or a job that otherwise requires special skill, initiative, judgment, or foresight;
Whether the employee has the opportunity for profit or loss based on his or her managerial skill;
Whether the employee invests in equipment or materials required for work or the employment of helpers; and
The number of contractual relationships, other than with the employer, that the potential joint employer has entered into to receive similar services.

The full text, with DOL commentary, of the new FLSA joint emlpoyer rule is available here.

Impact of Joint Employer Status

When two companies qualify as joint employers under the FLSA, they both share responsibilities under the law for workers’ wages. These obligations include the requirement to pay proper minimum wage and overtime.

How Will the New FLSA Joint Employer Test Affect Businesses?

In today’s economy, companies commonly outsource certain facets of their business. This trend has increased the number of outsourcing companies in the market that are willing to take on various services. Companies outsource a range of functions, such as information technology, payroll, or even marketing.

Parties who are outsourcing might want to re-evaluate whether they have joint employer status under the new DOL rule. However, the new standards only govern joint employer determinations under the FLSA. Companies must also consider joint employer status under other state and federal laws, including the Occupational Safety and Health Act, the National Labor Relations Act, and Title VII of the Civil Rights Act of 1964. While many federal agencies are moving toward less restrictive joint employer standards, the opposite is true in some states. Many states have their own minimum wage and overtime laws, for example, and some might trigger joint employer liability even where the FLSA, under the new rule, would not.

As a further caution, and beyond possible legal challenges to the validity of the DOL’s new interpretation of FLSA joint employer status, the 2020 rule’s longevity likely depends on the outcome of the next Presidential election. If a Democrat wins the White House, there is a strong possibility that this rule would be among a substantial package of workplace regulations that the next administration would revise once again.

For the above reasons, your company should not overreact to this single development. If potential joint employer liability is material to your operations, the new FLSA rule warrants further evaluation. But again, it would likely not be the only legal parameter affecting your approach to outsourcing and similar business strategies.

Best Practices Regarding Outsourced Staffing Arrangements

Though specific situations might justify alternative allocations of responsibility, here are some standard rules of thumb as a starting point for setting up or maintaining staffing transactions.

Whenever possible, the employer of record should be making all decisions with respect to conditions of employment, pay and method of payment, schedule, disciplinary actions, employee onboarding, and the maintenance of a personnel file. To the extent practical, that entity should also have direction and control over the work being performed. Almost every joint employer test used by government agencies focuses on those components. To reduce potential liability, companies should work together to modify any factors in the business relationship that raise red flags.

Businesses that are linked and jointly (or arguably jointly) employ workers should use this development as an impetus to review current contracts between the parties to make sure their respective responsibilities are in proper alignment. This review should include ensuring that liability and indemnity for claims have been addressed properly and fairly. Doing so can reduce exposure for both companies. You may want to engage the assistance of an attorney with co-employment experience to review the terms of your current contracts or assist with drafting an agreement to be used moving forward.

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