Are You Employed in Retail? The Administration is Threatening Your Overtime Pay

Recently, the U.S. Department of Labor (“DOL”) issued a final rule that would seek to deprive large numbers of employees overtime wages. The Administration’s action eliminates helpful guidance about the types of employees who are not considered to work in “retail” and would presumably be entitled to overtime under the federal Fair Labor Standards Act (“FLSA”). Employees considered “exempt” from the FLSA do not benefit from its minimum wage and overtime pay requirements. Exempt workers usually include executive, administrative, or professional employees who meet the tests—including the salary-based test—for the exemption. “Retail” workers may also be considered exempt and be paid on a commission-only basis. For nearly 60 years, the DOL had a list of industries presumably excluded from “retail” as having no “retail concept” – like banking. The Administration’s action would seek to short-change these hundreds of thousands or millions of workers of their overtime.

More specifically, pursuant to Section 7(i) of the FLSA, certain employees paid primarily on commission in the retail and service industries have long been considered exempt from overtime benefits. To qualify for this exemption, the employee must have been employed by a “retail or service establishment,” which the DOL consistently interpreted as an establishment with a “retail concept.” Such establishments typically “sell[] goods or services to the general public,” “serve[] the everyday needs of the community,” “[are] at the very end of the stream of distribution,” dispose their products and skills “in small quantities,” and “do[] not take part in the manufacturing process.” Implementing this interpretation, the DOL maintained lists of establishments that could not claim the overtime exemption: (1) those that the DOL viewed as having “no retail concept” and were always ineligible to claim the exemption (such as banks, certain dry cleaners, tax preparers, laundries, roofing companies, and travel agencies), and (2) those that “may be recognized as retail” but were potentially ineligible for the exemption on a case-by-case basis (such as auto repair shops, hotels, barber shops, scalp-treatment establishments, taxidermists, and crematoriums).

The DOL’s new rule eliminates these lists that provided helpful guidance for more than half a century of what types of establishments could claim the overtime exemption. Employers that previously fit into these categories may now try to assert that they have a retail concept and may qualify for the overtime exemption.  According to the Administration, this rule provides greater simplicity and flexibility to retail industry employers because the DOL will now apply the same “retail concept” analysis to all businesses. 

We disagree. This rule may be used by employers to attempt to justify paying their workers on commission without overtime, which means employees working longer hours with less pay. Retail workers already have a low median annual income of about $29,000 according the U.S. Bureau of Labor Statistics and are subject to wage and hour abuses. The new rule simply adds confusion around long-standing FLSA guidance for employers and employees about who can and cannot qualify for overtime provisions. The DOL made this decision without a notice and comment period, stating that no such period is required since both lists were interpretive regulations originally issued without notice and comment in 1961. Some attorneys question the propriety of the DOL’s decision. 

Courts may disregard this rule change. The DOL’s interpretations and lists are not binding on courts but can serve as guidance and, in the past, have been afforded some deference. However, when the Administration casts aside tried-and-true guidance to support the political agenda of the moment, seemingly without undergoing any rigorous process or study, such a move will be entitled to no deference under Perez v. Mortgage Bankers Association. 135 S.Ct. 1199, 1208 n.4 (2015) (highlighting that an agency’s interpretation that conflicts with a prior interpretation of a regulation is entitled to considerably less deference than a consistently held agency view). Workers’ rights advocates anticipate that when the Administration changes – hopefully soon – helpful guidance will be restored distinguishing true retail from many other industries that would opportunistically try to claim an exemption where none should exist.

Bryan Schwartz Law has written about the Trump Administration’s antipathy toward workers, DOL shifts, and overtime before and remains committed to protecting workers’ wages. If you were denied overtime pay you believe you were owed, contact Bryan Schwartz Law today.

Rights and Resources for Workers in the Era of COVID-19

Bryan Schwartz Law wants workers to know their rights and what resources are available to them during the coronavirus pandemic.

• The California Employment Lawyers Association (CELA) has put out a newsletter in English, Chinese, and Spanish with resources and guidance on the rights of California workers.

• CELA has also put out a guide for pregnant and parenting workers.

•  Legal Aid at Work, Centro Legal de La Raza, and Bet Tzedek have released a resource guide in both English and Spanish.

•  Legal Aid at Work has also prepared an FAQ on coronavirus and the workplace in English, Spanish, and Chinese.

• Legal Aid at Work is conducting clinics virtually for workers throughout the state.

• Bet Tzedek’s Employment Rights Team will be holding weekly virtual clinics each Wednesday from 5-7pm PST. Those interested in making an appointment should call Bet Tzedek’s main line at 323-939-0506 extension 415.

• The Center for Workers' Rights is operating a Coronavirus Job Protection Helpline to help answer questions about workplace rights. Call 916-905-1625 from 9 am - 5:30 pm M-F. If you are in the Sacramento area, you can reach the line by dialing 211.

• The California Employment Development Department has issued guidance for both workers and employers on issues such as filing for unemployment and business closures.

• A Better Balance has resources for various states, including California.

•  If you are undocumented:

o    Here is a list of California relief funds in English and Spanish for those who have lost their jobs due to coronavirus.

o    The California Immigrant Youth Justice Alliance has put together resources in various languages, including English, Spanish, and Portuguese.

This is not a comprehensive list, but we hope that it can help workers feel more protected during this difficult time. We encourage folks to follow the organizations mentioned above on social media for real-time information.

We are lucky in California to have so many organizations that are dedicated to protecting workers’ rights and strong laws protecting workers. We’re in this together. If you feel like your rights are being violated in the workplace, contact Bryan Schwartz Law today.

Pass the Gravy, But Don't Hold the Wages

Tomorrow, many Americans will prepare their Thanksgiving feast from a box of assembled ingredients, opting to skip the crowded grocery store frenzy by ordering their Thanksgiving meal from a meal kit delivery service. However, customers may be left with a bad taste in their mouths to learn that many of the workers that assemble their meals are being subjected to unsafe, unlawful working conditions and unfairly compensated for their work. 

That is the subject of a recent class action lawsuit filed in Northern California against Blue Apron, claiming that Blue Apron failed to pay workers overtime and failed to provide them with mandatory meal and rest breaks.

Meal kit delivery services are growing in popularity, and there are number of brands to choose from like Blue Apron, Martha and Marley Spoon, HelloFresh, or Sun Basket. Forbes reports the trend for these online meal-kit delivery services will continue, forecasting online sales of meal kits to top $10 billion by 2020, up from about $1 billion in 2015. These meal kit delivery services have capitalized on their success by reinventing dinner, making it easy and accessible for cooks of all skill levels. 

However, there is one group of people who have plenty of complaints about this new industry: the workers. 

Blue Apron employs over 1000 employees at their warehouse center in Richmond, California where nearly 8 million meal kits are assembled each month. Even under fair conditions, the job is difficult. Blue Apron workers assemble the perishable meal kit boxes inside warehouses kept at a temperature below 40 degrees. According to an investigative report by Buzzfeed, Blue Apron employees reported working 12 hour shifts, five to six days each week on the assembly line in order to meet production deadlines. 

On October 5, 2018, a class action lawsuit was filed against Blue Apron in the Alameda County Superior Court, alleging that Blue Apron failed to properly pay its workers, failed to provide its workers with meal and rest breaks, and failed to provide workers with accurate itemized wage statements. The lawsuit covers all Blue Apron hourly employees that work/worked in California from October 5, 2014 to the present. Plaintiff and the putative class are represented by the Turley & Mara Law Firm, APLC. The case was removed to the United States District Court for the Northern District of California on November 19, 2018 (Fairley v. Blue Apron, Inc., Case No. 3:18-cv-07000).

If you believe you have been subjected to employment discrimination, unfair pay or unsafe working conditions, please contact Bryan Schwartz Law today. 

Appellate Court Hits Tipped Workers

On September 6, 2017, the Ninth Circuit in Marsh v. J. Alexander’s LLC, No. 15-15791 (9th Cir. 2017) dealt a blow to tipped workers. The Court rejected U.S. Department of Labor (DOL) regulatory guidance that would have strengthened tipped workers’ claims to full minimum wage for the hours spent working outside the scope of tipped work. Currently, unlike California law (which rejects such a notion), the federal Fair Labor Standards Act (FLSA) allows employers to reduce a tipped worker’s wages based on what that worker earns in tips, thereby passing the payment of wages to the customer. This wage reduction for employers is called a “tip-credit.” The DOL’s interpretation of this provision would have made it so that the tip-credit would not apply to the hours an employee spent doing non-tipped work. In other words, when a waiter spends time cleaning, taking out trash, folding napkins and other non-tipped work, the DOL interpretation would have considered this type of work a “dual job,” separate from the employee’s tipped work, for which the worker is entitled to receive full minimum wage. The Ninth Circuit disagreed with the DOL’s interpretation, a decision further disempowering low-wage workers.

Tip-credit Explained

The FLSA generally requires employers to pay a cash wage of $7.25 per hour to their employees. 29 U.S.C. § 206(a)(1)(c). But where an “employee engage[s] in an occupation in which he customarily and regularly receives more than $30 a month in tips,” id. § 203(t), his or her employer may pay a reduced cash wage and claim the employee’s tips as a credit towards the $7.25 per hour minimum, id. § 203(m).

As part of the DOL’s clarification of the statutory phrase “more than $30 a month in tips,” the DOL promulgated the “dual jobs” regulation, which maintains that an employee can be “employed in a dual job.”. 29 C.F.R. § 531.56(e). The regulation provides that if the employee is engaged in one occupation in which “he customarily and regularly receives at least $30 a month in tips,” and is also engaged in a second occupation in which the employee does not receive the required amount of tips, then the employer can take a tip credit only for the first occupation. Id. To further clarify enforcement, the DOL provided guidelines in its Field Operations Handbook (“FOH”), of 29 C.F.R. 531.56(e) to interpret the regulation.

The FOH provides that “an employer may not take a tip credit for the time that a tipped employee spends on work that is not related to the tipped occupation.” FOH § 30d00(f) (2016). For example, the FOH states that “maintenance work (e.g., cleaning bathrooms and washing windows) are not related to the tipped occupation of a server; such jobs are nontipped occupations.” Id. As such, the FOH would support the conclusion that the employee is effectively employed in “dual jobs.” The Ninth Circuit, however, takes issue with this interpretation.

The Ninth Circuit points out that the DOL regulation itself provides two examples of situations where an employee is not employed in dual jobs: (1) “a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses”; and (2) a “counterman who also prepares his own short orders or who, as part of a group of countermen, takes a turn as a short order cook for the group.” 29 C.F.R. § 531.56(e). These examples appear to come at odds with the FOH, especially applied to the facts in Marsh.

Marsh Challenge to Tip Credit Application to Non-Tipped Work

In Marsh, plaintiffs argued in reliance on the DOL guidance that certain job-related duties that were not tipped work should be excluded from the FLSA tip credit, and plaintiffs should be paid the minimum wage for the time engaged in these distinct duties. Marsh, No. 15-15791 at 15. Plaintiffs contended that the defendant employer should pay its servers minimum wage – without a reduction for tips - when the servers engaged in duties such as stocking food, taking out trash, sweeping floors, wiping down tables and walls, or other tasks that require no customer interaction. Id.

The Ninth Circuit court disagreed and held that the FOH was not entitled to deference because the “dual jobs” regulation is unambiguous. See Auer v. Robbins, 519 U.S. 452, 462 (1997) (holding that courts should consider agency guidance in cases where the regulation is ambiguous); see also Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 208 (2011). Looking back to the FLSA and the “dual jobs” regulation, the court determined that the dual jobs regulation interprets § 203(t)’s reference to employees “engaged in an occupation” to mean employed in a “job,” not performing an activity. See 29 C.F.R. § 531.56(e) (emphasis added). Furthermore, citing Abramski v. United States (2014), the Court wrote that “nothing in the FLSA’s ‘context, structure, history, [or] purpose’ suggests that Congress intended to use the term ‘occupation’ in § 203(t) to mean discrete duties performed over the course of the day.” Abramski v. United States, 134 S. Ct. 2259, 2267 (2014). Based on the regulation, the Ninth Circuit determined that plaintiffs could not state a claim by alleging that their discrete tasks or duties comprised a dual job.

The Future for Tipped Workers

Marsh illustrates the continuing controversy around the tip-credit provision, including its discriminatory effects and how it continues to push costs of labor onto the consumer. In its interpretation of the tip credit, the Marsh Court limits the ability of the minimum wage to protect the well-being of low-wage service workers, perpetuating a system that has grown the ranks of the working poor. For employees living hand-to-mouth, being paid at least the minimum wage may be the difference between making rent and eviction, eating and starving, providing for children or having them under the care of the state.