Articles Posted in Employment Law

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A number of successful New York wage-and-hour lawsuits have made headlines recently, after the courts determined companies failed to comply with the state’s strict overtime requirements.

These cases are indicative of a growing trend in employment litigation, where the laws have become more strict and employees are increasingly more educated about their rights.

New York Labor Law and the federal Fair Labor Standards Act requires companies to pay time-and-a-half for any hours over 40 in a regular work week to non-exempt employees. Current minimum wage in the state is $8, until Dec. 31, 2014, when it increases to $8.75. It will increase again the following December to $9 hourly.
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Over the last two decades, the Federal Judicial Center reports the number of wage-and-hour lawsuits filed nationally has spiked by 430 percent. In New York, the number is expected to climb even higher in response to a bill passed by the New York legislature in June 2014.

The measure, A08106C/S05885-B, was drafted for the purpose of bolstering the New York Wage Theft Prevention Act, as well as other provisions of the state’s labor law. The action does ease some requirements for employers, but it imposes heftier penalties for violations – particularly for repeat offenders – and allows for successor employer liability, something that didn’t before exist.

Because wage and hour theft law in New York has become increasingly complex, and the penalties for breaking the law ever more severe, it’s important that business leaders take the time to become educated about their obligations and potential consequences for violations.
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In the last several years, the U.S. Supreme Court made it tougher for individuals to bring forth successful discrimination lawsuits – particularly class action cases. One of the most recent examples is that of Wal-Mart Stores v. Dukes, decided in 2011.

However, workers haven’t stopped filing employment lawsuits in New York. What it appears they are doing is shifting gears. Rather than focusing on things like racial discrimination, workers have been filing a larger number of wage-and-hour lawsuits. Most commonly, they allege employers misclassify workers, allowing them to skirt overtime pay and other benefits.

According to the annual Workplace Class Action Litigation Report, there were approximately 10 percent more wage-and-hour lawsuits filed last years as compared to what was filed in 2012. This year, it appears we might be on track to see even more wage-and-hour claims.
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During their last session, U.S. Supreme Court justices delivered several blows to those who sought to file employment and wage and hour lawsuits in New York and throughout the country.

In effect, there were six major decisions that could be categorized as a “loss” for workers’ rights, ultimately cooling class action filings, clearing the way for more business-friendly arbitration action and heightening the hurdles necessary to file such action in the first place.

In the newest 2013-2014 session, which began this month, the high court is slated to hear at least seven cases that could have some impact on wage and employment law. Some of that impact could be significant.
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Every year, Major League Baseball solicits help from volunteers to assist with its wildly popular New York City FanFest, called the “largest interactive baseball theme park in the world.”Those volunteers aren’t paid, but they are given the opportunity to win a pair of All-Star Game tickets if they work three shifts at any of the festival events. With about 2,000 volunteers in all, the chances of winning tickets are slim.

Now, one of those volunteers has filed a New York wage and hour lawsuit against the league, alleging the company raked in nearly $192 million during the event, while it was simultaneously violating the state’s minimum wage and hour laws.

Adult patrons to the event are charged $35, while children over the age of 2 pay $30 each.

In all, the volunteer says he worked 17 hours for the league last month. Had he been paid the state’s minimum wage for those hours, he would have earned $123.25. The wages could be even higher if he included the time spent sitting through a mandatory orientation and the time it took to undergo a required background check.

Instead, in addition to the chance to win game tickets, he, along with the other volunteers, were provided with a t-shirt, a drawstring backpack, a water bottle, a baseball and free admission for a friend. They weren’t allowed to bring other food and drinks into the event convention center, but they could purchase a bag of chips for $5 or a lemonade for $7.50.

The lawsuit alleges the MLB, which rakes in an estimated $7 billion in profits annually, is soliciting and receiving free labor, in direct violation of state laws governing such matters. State minimum wage law holds that all workers are entitled to receive minimum wage payment for their labor.

But are volunteers entitled to wages?

Maybe.

New York’s minimum wage law holds that an employee is defined as any person employed or permitted to work in any occupation. However, there are a number of exclusions. Those include babysitters, farm workers, certain religious organization workers, summer camp workers – and certain volunteers.

There are two volunteer exemptions to the New York law. The first holds that an organization is only exempt from the labor law if it is organized and operated solely for religious, charitable or educational purposes and if no part of the net earnings benefit a private shareholder or individual. That does not describe MLB.

The second exemption allows for a pass to companies that are putting on a recreational or amusement event wherein no single event lasts longer than eight straight days or more than once a year. Any volunteer for an event like this has to be at least 18 years-old and the business has to notify each volunteer in righting that he or she is volunteering his or her services and waiving his or her right to receive minimum wage. Such a notice has to be signed and dated by the volunteer and kept on file for at least 36 months.

The media reports on this case don’t indicate whether such an agreement was signed. If it wasn’t, the plaintiff – and many others – may well be entitled to compensation.
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The point of the New York’s prevailing wage law is to ensure that city government contractors and subcontractors pay their building service and construction workers no less than the prevailing rate of wage and benefits, as set by the New York City Office of the Comptroller.Those with the right to make New York prevailing wage claims include:

  • construction workers under a public works contract on a city-owned facility;
  • building service employees who work security, cleaning, clerical or food services details in a city-owned building;
  • transport service workers in a city-owned building;
  • providers of certain home attendant services, day care providers or head start services to residents of New York City.

Similar to the state’s law was a bill passed by the New York City Council last year, requiring that any company that receives $1 million or more in tax breaks or financing has to pay its workers either a minimum of $10 hourly with benefits, or $11.50 without benefits.

At the time, Mayor Michael Bloomberg vetoed the measure.Council overrode it. Bloomberg wouldn’t drop it. He appealed that decision in federal court.

Now, he’s lost.

A federal judge in Manhattan dismissed that appeal, holding that the mayor didn’t have standing in the matter, as he failed to prove a suffering of any concrete or particular injury if the bill was enacted.

Despite the fact that the measure would boost paychecks for thousands of low-wage workers in the city, Bloomberg has vowed to continue the fight. He announced intentions to take the case to state court, where he anticipates the case will receive an outcome more favorable to his position.

Bloomberg has been a vocal opponent of increased minimum wage rates for low-income workers. A similar bill, called the “prevailing wage bill,” was also passed by the city and would raise minimum wage for all security guards in the city. However, it was the same story: Bloomberg vetoed the bill, council overrode it and now the city is suing city council. That case is still pending.

Many view living wages as an important issue because they are based on an area’s cost of living, as opposed to an arbitrary minimum that is applicable throughout the state or country. As we in New York City all know, the cost-of-living here far exceeds what you can expect to pay in other areas of the country.

In fact, research by the Council for Community and Economic Research determined last year that New York City is home to three of the top five highest cost of living areas in the country, with Manhattan ranking No. 1, followed by Brooklyn at No. 2. Queens ranks No. 5. In Manhattan, the standard of living is more than twice the national average.

The Living Wage Project reports that while the 2012 minimum wage was $725, that was far below the nearly $12 an hour it takes to scrape by here.

Setting a wage of $10 an hour plus benefits (or $11.50 without benefits) gets us much closer to what people living in the city need to earn in order to survive.
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Late last month, Urban Outfitters Inc. was slapped with not one but two wage-and-hour lawsuits regarding alleged overtime violations in both New York and New Jersey.These cases represent an increasing trend of New York employment litigation aimed at companies that have either improperly compensated workers for their time or failed to provide appropriate breaks as required by state and federal law.

Part of this upswing can be attributed to the fact that the down economy had many employers struggling to stay afloat with fewer resources – and that includes human resources. More has been expected of people who managed to hang onto their jobs. Market competitiveness and the fear that they might suffer a job loss if they spoke up also kept employees from taking action for some time.

Now, as the economy inches toward improvement, we see that attitudes are shifting. Not only that, but workers are becoming more aware of their rights. They are more knowledgeable about the law and they know when employers are failing to uphold their end of the bargain.

In the case of Urban Outfitters, employees in New Jersey say that store supervisors were instructed by company leaders to forge employee time cards in an effort to avoid paying them overtime. The New York employees, which have filed a collective action, say that the store misclassified a number of employees so that they would be exempt from overtime pay and other Fair Labor Standards Act requirements.

In the New Jersey case, Lesley Mitchel-Tockman et al. v. Urban Outfitters Inc., workers repeatedly complained to management about the lack of overtime pay on their paychecks, but the alterations of time cards continued. In one case, a worker who was particularly vocal in speaking out against the practice suffered retaliation and also had her work hours reduced. She was ultimately fired.

The New York collective action, Jeffrey McEarchen et al. v. Urban Outfitters Inc., involves store managers from Brooklyn, New York City, Nashville, Tenn. and Birmingham, Ala. The employees there say they routinely worked over 40 hours each week, but were denied overtime pay because they were classified as “managers.” This was despite the fact that their duties required little skill and did not include any managerial responsibilities. The workers say they mostly folded clothes, operated cash registers, clean the stores and took out the garbage.

The Federal Judicial Center reports that nearly 7,800 wage-and-hour lawsuits have been filed throughout the country so far this year. While that might seem relatively low, the fact is, it represents a spike over the last several years. It’s a 10 percent rise from what we saw in all of last year, when about 7,100 cases were filed. And it’s a 400 percent increase when we look at figures from 2000 to 2011.

The Fair Labor Standards Act, passed in 1938, stipulates that workers must be paid overtime time-and-a-half pay for any work in excess of an 8-hour day or 40-hours-weekly. It also differentiates between workers who are to be paid hourly and “highly-compensated workers” who instead receive salaries and no overtime.

However, the law in some cases leaves a lot of gray area, so it’s often up to the courts to interpret.

Questions regarding New York’s Wage and Hour laws can be found by vising the New York State’s Department of Labor, Labor Standards website.

If you suspect your employer may have improperly classified you in order to deny paying you overtime or has not properly compensated you for overtime hours, contact our offices today.
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Wider implications are expected, following the recent ruling by a U.S. District judge in New York holding that production company Fox Searchlight Pictures had broken overtime and minimum wage laws by failing to pay interns who toiled on the production of the 2010 blockbuster hit, “Black Swan.”We anticipate from here seeing a wave of wage and hour litigation in New York, particularly as it relates to interns who are paid very little or nothing for their work.

The Economic Policy Institute estimates there are approximately 1 million unpaid internships offered annually in the U.S. each year, with most carried out during the summer, when there is a break between regular semesters. For a lot of students facing a competitive job market upon graduation, unpaid internships have become all but essential for gaining practical experience and enhancing their resumes.

Unpaid internships account for about half of the total number of internships.

Problems arise, however, when companies fail to correctly draw the line in the sand regarding what constitutes a beneficial situation for the student and conversely what constitutes free labor. The general rule is that the arrangement should be skewed in favor of the intern, though there are other requirements as well.

In the recent federal district court ruling, the judge held that the movie production firm should have paid the plaintiff interns because:

  • They performed low-level work that required no specialized training;
  • They did the same work as regular employees;
  • They provided value to the company.

Some of that work included organizing file cabinets, making copies, running errands, drafting copy leaders and tracking purchase orders. None of this would be greatly beneficial in a future job in film, and instead basically amounted to free labor for the firm.

Just two days after that decision, two former interns at the New Yorker and W Magazine filed lawsuits alleging the firm violated federal labor laws by paying interns $12 daily to run errands for editors and run deliveries to various vendors. Each received a flat rate of $300 to $500 for their three months of service.

Then there was the recent case of PBS talk show host Charlie Rose, who settled a class action suit involving 190 former unpaid interns who worked on his show from 2006 through 2012.

Another class action lawsuit is pending against Harper’s Bazaar magazine in the Southern District of New York, brought by several former interns who say they did the same work as full-time employees, except received no pay.

Companies who offer or are thinking about offering unpaid internships should first consult with an experienced labor and employment attorney. We can help you determine whether the policy you have in place is in line with federal labor law standards.

Generally speaking, if your firm offers opportunities to unpaid interns – even just one or two at a time – you must make sure that:

  • The internship is similar to training the individual would receive in an educational environment;
  • The arrangement is for the benefit of the intern;
  • The intern is not there to displace regular employees;
  • The employer isn’t deriving any immediate advantage from the work of the intern, and in fact, operations may be slightly impeded;
  • The intern knows he or she isn’t automatically entitled to a job when the internship is done;
  • Both parties understand that the arrangement is unpaid.

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It starts with something as small as the clink-clanking of coins in a tip jar.

But those dollars and cents can add up quickly, and if they aren’t distributed fairly, it can result in someone filing a wage and hour lawsuit.That’s exactly what’s happening amid a dispute with a national coffee chain, now embroiled in a case before the New York Court of Appeals. The case could ultimately have broad consequences for workers in hospitality, as well as for those working at the coffee chain’s stores throughout the country.

Federal Judicial Center data reveals that wage-and-hour litigation has actually shot up more than 430 percent in the last two decades. Reasons for this are varied. On one hand, workers are more aware and sensitive to wage-and-hour issues and what their rights are under the law. Social media may be at least partially credited. But also, workers may be more and more frequently turning to the courts to ensure fair pay because the Department of Labor has failed to make the resources available to ensure employers are complying with the law.

The latter theory goes that employers became lax in their application of the law because enforcement is nowhere near stringent.

When the economy got bad, companies were able to squeeze employees more than ever, with little fear that any would fight back because they were desperate to simply have a job. But workers are taking a stance now that the economy is improving.

Claims generally fall into one of three categories:

  • Hourly workers who aren’t paid for all of the hours they have worked;
  • Salaried employees who claim they are owed overtime;
  • Tipped minimum wage workers who claim their tips don’t add up to the minimum wage.

The New York coffee chain case pits baristas, who are paid hourly, against shift supervisors, who are also paid hourly and assistant managers who are salaried workers. As it stands now, baristas and shift supervisors must share the tip, but assistant managers may not.

The case is being heard by a federal appeals court, but it involves a question of New York labor law. Specifically, the issue is what comprises the definition of employer “agent” as it relates to prohibitions of tip-sharing. Additionally, the court needs to answer whether state law permits employers to exclude an otherwise tip-eligible employee from sharing the pot.

We do now that shift managers, who are below assistant managers in rank, are paid hourly, which has been part of the reason they have been allowed to share in that tip, while assistant managers can’t.

The court’s decision will provide clarification that is expected to affect more than 40,000 businesses throughout the state of New York, including about 250,000 hospitality industry workers just in New York City.

Lawyers representing the baristas say the shift managers should also be excluded from sharing those tips, since they have authority over the baristas, and may coordinate wages and breaks.

Representatives of the chain, meanwhile, say that the shift supervisors, along with the baristas, provide customer service, while the assistant managers have “real authority” to schedule, hire and fire.

As it now stands, it’s up to the employer to interpret what state statute says about whether an employee is eligible.
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In the course of our many years as business lawyers, we have represented clients from both sides of the aisle in employment disputes.Having this kind of unique perspective is of great benefit to those who trust us to handle their cases. We’re intimately familiar with negotiation tactics and bottom lines for both employers and embattled employees.

One thing we’ve noted in all these years is that when it comes to companies, especially smaller firms, there seems to be a tendency to simply settle an employment case rather than have it played out in a courtroom. Some simply view it as the cost of doing business, regardless of whether they’ve done anything wrong.

But it’s important to understand when this might be a mistake.

First, it bears mention that consulting with an experienced attorney at the outset of your business formation – and then periodically each year – may help you avoid many of the litigation catalysts that may arise in the first place.

In addition to that, your attorney should be involved in the process from the very moment it comes to your attention. In some cases, business are blindsided. Other times, there may have been some significant foreshadowing. When you can, get your attorney involved early.

The other thing to determine is whether there was in fact any wrongdoing.
You don’t have to necessarily break the law to get sued. However, if you are being sued, it’s a good idea to know – and to be able to prove – that you have done the right thing. In cases where there may have been misconduct – or at the very least the strong appearance of such – it may be worth engaging in a discussion over a settlement agreement. But that’s not a conclusion you should reach hastily. You should be apprised of all your options and the potential risks of each.

You may also want to consider out how much you can afford to pour into the case, the reputation of the plaintiff and the potential distraction of litigation.

Some reasons you might consider fighting it out:

  • The case is frivolous. You might need to do a fair amount of research and investigation to even determine whether that is the case, but if the case is frivolous, a settlement shouldn’t be your first chose.
  • Doing so would prove a point. Employees are well aware that many companies would rather settle. Fighting a case through to the end might send a powerful message that you are not willing to simply pay up on every claim. It may be a good deterrent for such cases in the future.
  • There is a fair amount of bad press. These situations must be handled delicately – and your attorney is usually the best person to speak to the media on your behalf. But settling in some cases could make the wrong impression, with the public presuming that you’re wrong. Even if the only reason you’re doing it is to be able to move on, the media might not see it that way.

To be sure, the decision of whether to “fight or flight” is not one you should take lightly. You should never assume that you have been pigeonholed into a single option.
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