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Wage And Hour Claims: Federal New York State Laws

Employers, and attorneys, do not discuss or read much about wage and hour laws; they often are only an ancillary part to a larger discrimination complaint, and, like the fair credit reporting act, wage and hour issues are not as snazzy or colorful as discrimination cases generally. But certain wage and hour issues, for example overtime compensation and improper wage deductions are among the hottest claims being asserted in employment litigation today.

Wage and Hour Laws - Introduction

"Wage and hour" laws dictate when, where and how much an employee must be paid. These laws have significant "teeth" in that;

  • violations can lead to an award of attorneys' fees and liquidated damages equal to 25% to 100% of back wages due;
  • the statute of limitations in a state like New York is 6 years, 3 years longer than federal law provides; and
  • an employer does not have to know that it owes overtime compensation in order to be held liable.

Federal and New York State Laws - A Brief Overview

Wage and hour claims are governed by the federal Fair Labor Standards Act ("FLSA") that was passed by Congress in 1938 as one statute in a series of pro-labor statutes (29 USC 201 et seq.). FLSA covers issues pertaining to minimum wage, maximum hours/overtime compensation, equal pay for equal work, and child labor standards; in 1967, prohibitions against age discrimination were added to the act.

FLSA does not regulate the specifics of wage payments; instead, state law generally regulates ministerial aspects of wage and hour obligations, such as when and how wages must be paid, what deductions can be taken from wages, and general requirements for meal and rest periods.

In New York, those regulations are embodied in the New York Labor Law and four wage orders issued by the Department of Labor. Federal law does not preempt state law; whichever is more restrictive governs. 29 USC § 218(a); 29 CFR 531.26.

Federal and New York State Laws - A Brief Analysis

There are a lot of issues to become acquainted with; one probably could devote a separate conference to these issues. However, the following is a summary of the significant questions that should be asked when analyzing a wage and hour issue. The summary primarily describes the relevant obligations under federal law, although analogous state law obligations are noted where different.

Is There and Employer/Employee Relationship?

The FLSA applies only in situations where an employee/employer relationship exists. There must be an employment relationship; independent contractors are not covered. 29 USC § 203(g) (the word "Employ" includes "to suffer or permit to work"); Baker v. Flint Engineering & Constr. Co., 137 F.3d 1436 (10th Cir. 1985) (using the economic realities test to determine employment relationship). Federal law only covers an employee "engaged in commerce or in the production of goods for commerce"; the focus is on the work performed by the employee, not the employer (29 CFR 776.0a).

Definition of "Employer"

Federal law defines the term "employer" as "any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency." The definition does not include any labor organization or anyone acting in the capacity of officer or agent of such labor organization." 29 USC § 203(d). Under federal law, an "employee" means "any individual employed by an employer." 29 USC § 203(c)(1).

The state of New York has a slightly different definition. An employer is New York is "any person, corporation, limited liability company, or association employing any individual in any occupation, industry, trade, business or service." NY Labor Law §190 (3). New York specifically excludes a governmental agency from this definition. An employee in New York is, "any person employed for hire by an employer in any employment." NY Labor Law §190 2).

Is the Employee Exempt from Overtime?

Exemptions are construed narrowly with doubt resolved in favor of coverage of employees; burden is on the employer to prove that employee is exempt; mostly a question of fact. Auer v. Robbins , 519 U.S. 452 (1997); Klein v. Rush-Presbyterian-St. Luke's Med. Ctr., 990 F.2d 279 (7th Cir. 1993).

Law exempts several categories of employees. However, the most significant exemptions are: "any employee employed in a bona fide executive, administrative, or professional capacity, ... or in the capacity of outside salesman." 29 USC § 213(a)(1); Wage Order § 142-2.14. The specific criteria to determine if a person is in one of the exempt categories can be found in the following federal regulations:

  • Bona Fide Executive - 29 CFR 541.1

    • whose primary duty is management of the enterprise in which he is employed; and
      who customarily and regularly directs the work of 2 or more other employees in that enterprise; and

    • who has authority to hire or fire those employees, or whose suggestions or recommendations regarding hiring, firing and other status changes are given particular weight; and

    • who customarily and regularly exercises discretionary powers; and

    • who does not devote more than 20% of his hours in a workweek to activities not directly and closely related to (a) through (d) (retail or service establishments, not more than 40%); and

    • who is compensated for services on a salary basis of not less than $155 per week excluding board and lodging (further exemption for high salaried executive).

  • Bona Fide Administrator - 29 CFR 541.2

    • whose primary duty consists of either performance of office or non-manual work directly related to management policies or general business operations or of functions in administration of school system; and
      who customarily and regularly exercises discretion and independent judgment; and

    • who regularly and directly assists a proprietor, executive or administrator, or performs under only general supervision specialized or technical work, or executes special assignments and tasks; and

    • who does not devote more than 20% of his hours in a workweek to activities not directly and closely related to (a) through (c); and

    • who is compensated on a salary basis or fee basis at not less than $155 per week.

  • Bona Fide Professional - 29 CFR 541.3

    • whose primary duty consists of performance of work requiring advance type of knowledge in science or learning, customarily acquired by prolonged course of specialized intellectual instruction or work that is original and creative; and

    • whose work requires consistent exercise of discretion and judgment; and

    • whose work is predominantly intellectual and varied and whose results cannot be standardized in relation to given period of time; and

    • who does not devote more than 20% of hours in workweek to activities that are not an essential part of and necessarily incident to (a) through (c); and

    • who is compensated on salary or fee basis at a rate not less than $170 per week.

  • Outside Salesman - 29 CFR 541.5

    • who is employed for the purpose of, and who is customarily and regularly engaged away from the employer's place of business, making sales or obtaining orders or contracts; and
      whose hours of work of a nature other than (a) do not exceed 20% of hours worked in a workweek.

New York State similarly defines each of the categories in Wage Order § 142-2.14. (12 NYCRR 142).

Many of the categories have a minimum salary level as part of the criteria. This is called a "Salary Basis". It exists if employee receives consistent, predetermined amount not subject to reduction because of variations in quality or quantity of work produced. Martin v. Malcolm Pirnie, Inc., 949 F.2d 611 (2d Cir. 1991) (employee is not exempt as a salaried executive if subject to deductions for partial-day absences).

If Covered - What Is the Overtime Obligation?

The objective of the maximum hour/overtime laws was to force an increase in the rate of an employee's compensation after a specified number of work hours. Under the Federal requirements an employer must pay one and on-half times the employee's regular rate for all hours employee works in excess of 40 hours per week. 29 USC § 207.

New York Obligation - If employee does not live on employer's premises, employer must pay federal overtime compensation for all hours employee works in excess of 40 hours per week; if employee does live on employer's premises, employer must pay federal overtime compensation for all hours employee works in excess of 44 hours per week. Wage Order § 142-2.2.

General Overtime Principles

  • Overtime compensation must be given even if not authorized, though employer can discipline for unauthorized overtime in other ways.

  • Overtime compensation cannot be waived by the employee.

  • Overtime compensation can be paid in forms other than cash or its equivalent, unless the use of such alternative is to avoid obligation.

  • Overtime compensation need not be paid weekly, but must at least be paid on regular pay day.

Refusal to authorize overtime will not prevent the recovery of compensation if the employer knows or has reason to believe that the employee worked the extra hours. The mere promulgation of an anti-overtime policy is not enough. 29 CFR 785.11; 29 CFR 785.13.

If Covered - What Work Is Included in "Work Time"?

Work time includes all time spent for employee's principal duties and all essential ancillary activities must be counted. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946). These principal duties include all productive tasks required for performance of job. 29 CFR 785.24. Work time also includes all essential ancillary activities include receipt of instruction, loading or fueling vehicles, etc.

Further, all time spent for such duties and activities must be counted, whether on or off premises, and before or after work hours. In addition work time includes rest or break periods of relatively short duration, generally less than 20 minutes. 29 CFR 785.18.

What Work Can be Excluded from "Work Time"?

Time that can be excluded from work time includes, time spent changing clothes or showering unless such activities are necessary and directly related to principal activities, or unless made compensable by employer by contract, custom or practice. Steiner v. Mitchell, 350 U.S. 247 (1956) (time employee spent changing clothes and showering in course of job in battery plant should be counted where manufacturing process involved extensive use of caustic and toxic materials); Mitchell v. King Packing Co., 350 U.S. 260 (1956) (time spent by knifemen in meat packing plant sharpening knives before and after scheduled workday); Albanese v. Bergen County , 991 F. Supp. 410 (D.N.J. 1998) (employee was entitled to compensation for off-clock maintenance of uniforms and guns if activities were performed for employer's benefit and were not de minimis).

However, "time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time during the week involved by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee". 29 USC § 203(o).

Work time generally excludes travel time to and from work is generally not counted, unless traveling occurs in the course of the work day. 29 CFR 785.33. In addition, meal periods are not counted if they are 30 minutes or longer and if employee is relieved of all duties during the period; employer does not need to grant permission to leave premises as long as employee is completely freed from duties. 29 CFR 785.19; Reich v. Southern New England Telecommunications Corp., 121 F.3d 58 (2d Cir. 1997) (compensation is required for meal period "during which a worker performs activities predominantly for the benefit of the employer").

An employer can exclude training programs and lectures/courses are not counted as work time if attendance is voluntary, attendance is outside regular work hours, no real productive work is performed, and training is not directed to making the employee more proficient in present job. 29 CFR 785.27.

If Covered - How Do You Calculate the Regular Rate?

The Federal government generally define wages ad including all compensation except discretionary bonuses, as well as the reasonable cost of board and lodging. 29 USC § 203(m). The State of New York includes all earnings regardless of whether earned on time piece, commission or other basis as wages. NY Labor Law § 190[1].

  • Federal Obligation -

    • "Regular Rate" includes "all remuneration for employment paid to, or on behalf of, the employee", except for certain sums and payments set forth in the statute, such as holiday gifts, compensation for certain periods which are not made as compensation for hours of actual employment, and certain extra compensation. 29 USC § 207(e).

    • Wage and Hour Division regulations provide several alternatives for determining hourly and salaried employees' "regular rate" in certain cases. 29 CFR Part 548; 29 CFR 778.107-778.122. For example: Employee is paid on weekly basis, and works six eight-hour days in a workweek under the terms of his employment agreement. During the week, employee performs three different types of work, each at different rates of pay. Employer could divide earnings for each type of work by the number of hours working in each type, to arrive at three different basic rates. If overtime worked on the sixth day, overtime premium would be _ the regular rate of that type of work multiplied by the eight hours worked on that day. 29 CFR 548.303.

  • New York Obligation -

    • Department of Labor wage order provides the manner in which an employer should determine employee's "regular rate". Wage Order § 142-2.18 ("When an employee is paid on a piece work basis, salary, or any basis other than hourly rate, the regular hourly wage rate shall be determined by dividing the total hours worked during the week into the employee's total earnings").

Are There Other Wage and Hour Obligations?

Yes. There are federal and state minimum wage obligations. The federal minimums can be found in 29 USC § 206(a). The New York State minimum wage are found in section 142-2.1 of the Wage Order. In addition there are standards and minimums for child labor. 29 USC § 212.

In addition to the number or hours that can be worked and the wage level that must be paid, there are federal record keeping obligations as well as requirements for notices to employees, and posting signs in the workplace. 29 USC § 211; 29 CFR Part 516.

The state of New York has a number of additional requirements for employer that state determine the frequency of payments to employees and other administrative obligations. NY Labor Law § 191 and 192.

Deductions from Wages

New York state prohibits certain deductions from an employee's wages. NY Labor Law § 193.

  1. No employer shall make any deductions from wages of an employee except if made in accordance with law, rule or regulation, or if expressly authorized in writing by the employee and are for the benefit of the employee (limited to, e.g., insurance premiums, pension, health or welfare benefits, union dues). Hudacs v. Frito-Lay, Inc., 90 N.Y.2d 342, 660 N.Y.S.2d 700 (1997) (risk of loss for such things as damages or spoiled merchandise should be on employer, rather than on employee).

  2. No employer shall make any charge against wages, or require an employee to make any payment by separate transaction unless such charge or payment is permitted as a deduction from wages under subdivision (a).

In addition to the federal obligations, New York has its own requirements for employer record-keeping and information posting obligations. NY Labor Law § 195

Penalties for Failure to Abide by Wage and Hour Laws

State and federal claims can be made for an employer who fails to pay wages as described in the statutes. An employee has two years to bring an action for unpaid minimum wages and unpaid overtime compensation. 29 USC § 255(a). However, New York has a six year statute of limitations for actions to recover full wages, benefits and wage supplements. NY Labor Law § 198.

The type of federal claims for wage recovery actions that can be brought include:

  1. Employee can bring an action in either federal or state court, seeking an injunction, unpaid wages or unpaid overtime compensation, and liquidated damages in certain cases.

  2. Department of Labor can bring action to enjoin violations, and to recover backpay and liquidated damages on behalf of named employees.

  3. Department of Labor can assess a penalty of up to $1,000 per violation for repeated and willful violations. 29 USC §§ 216 , and 217.

 

Costs and Remedies

Costs and remedies for a New York employer who fails to pay an employee less that the wage to which they are entitled are described in the NY Labor Law § 198. New York employers may also be subject to criminal penalties for failure to pay wages in accordance with the New York labor laws. NY Labor Law § 198a.

A New York employee can bring action in state court seeking ordinary costs, a reasonable sum up to $50 for expenses, attorneys' fees, and, if violation was willful, liquidated damages equal to 25% of due wages. Brock v. Superior Care, Inc., 840 F.2d 1054 (2d Cir. 1988) (violation is willful is employer knowingly violates or shows reckless disregard for provisions of the law); Wirlz v. Malthor, Inc., 391 F.2d 1 (9th Cir. 1968) (good faith is generally not a defense to liability for owed wages).

Few Possible Defenses (limited)

There are generally few defenses for violations of wage and hour laws. Generally, the question is whether or not the employee was paid less than they should have been paid. Mistake or a good faith belief is not a defense. However, defenses are possible if the "employee" does not meet the language of the statutes. There was in fact no employer relationship or the "employee" was really a contractor.

An employer may also have a defense for failure to comply with the provisions of the Fair Labor Standards Act if they plead and prove the act complained of was in compliance with an official written interpretation of the federal law which was relied upon in good faith. 29 USC § 239; 29 CFR 790.13.

There may also be certain general equitable principles that an employer may use as a defense. For instance, the employer did not know and had no reason to know of unreported work hours.

Conclusion

Wage and hour laws are detailed and technical. They may not be as exciting as say discrimination laws, but there are few defenses if the employer does not conform. The administrative agencies that administer these laws favor the employee. Therefore, employers need to look at their policies, and perhaps create or revise their policies, to reduce the likelihood of liability.

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