Presented By: Heather A. Giambra, Esq., Schröder, Joseph & Assoc., LLP

Hot Topics: The Fair Labor Standards Act

and NYS Wage and Hour Laws In the Hospitality

Industry.

Presented By: Heather A. Giambra, Esq., Schröder, Joseph & Assoc., LLP

Exemptvs.

Non-Exempt

Employee Classification:

Exempt from what? 1. The minimum wage and overtime requirements of the FLSA/NYS Labor Law $7.25/hour; and2. Time and one half the regular rate of pay for

all hours worked over 40 hours in a workweek.

Note: New York State has its own minimum wage law which is applicable to all private sector entities with employees in NYS. The NYS minimum wage is currently $8.75/hour and is scheduled to increase to $9.00/hour on December 31, 2015.


What are the exemptions? 1. Executive2. Administrative3. Professional4. Outside Salesperson5. Computer Professionals

Note: New York State recognizes the Executive, Administrative, Professional and Computer exemptions. In NYS Outside Salespeople are not included within the definition of “employees” to whom the state wage and hour laws apply. Therefore, there is no need for an outside salesperson exemption under the State law.


Other Industry Specific and Less Common exemptions? 1. Seasonal Amusement or Recreational Establishment2. Agricultural3. Motor Carrier4. Other Transportation Exemptions5. Live-In Domestic Employee Exemption* 6. Police, Firefighters and Other Public Safety

Communications

Note: NYS does not recognize an exemption for live-in domestic employees – thus, the NYS minimum wage and overtime laws apply to all live-in domestic workers.


What is required for the EXECUTIVE exemption? 1. Employee must be compensated on a salary or fee basis of at least $455.00* per week; and2. Employee’s primary duty must be managing the enterprise or a customarily recognized department or subdivision of the enterprise; and3. Employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; i.e., four half-time employees; and4. Employee has authority to hire or fire, or make recommendations on hiring, firing, advancement, promotion or other changes of status given “weight.”

Note: In New York State the minimum weekly salary requirement is $656.25/week and is scheduled to increase to $675/week on December 31, 2015. New proposed regulations will increase the FLSA minimum salary to approximately $970.00/week.


What factors are considered in determining the “primary duty”?1. The relative importance of the exempt duties as compared with other types of duties; and2. The amount of time spent performing exempt work; and3. The employee’s relative freedom from direct supervision; and4. The relationship between the employee’s salary and the wages paid to other nonexempt workers for the same type of nonexempt work.


What is required for the ADMINISTRATIVE exemption? 1. Paid on a salary basis at a minimum of $455* per week; and 2. Primary duty is performance of office or non-manual work

directly related to management or general business operations of employer or the employer’s customers; and 3. primary duty requires the exercise of discretion & independent judgment on matters of significance .



What is “directly related to the management of the general business operation”? 1. Refers to the type of work performed by the employee. 2. Work must be directly related to assisting with running or

servicing the business.3. Does not include working on a production line or selling

goods in a retail establishment.

Examples : Tax, Finance, Accounting, Budgeting, Auditing, Insurance, Quality Control, Purchasing, Procurement, Advertising, Marketing, Research, Safety and Health, Human Resources, Employee Benefits, Labor Relations, Legal and Regulatory Compliance, Computer Network, Internet and database Administration.


What constitutes “discretion and independent judgment”? 1. Whether employee has authority to make independent decisions on matters of importance or consequence.2. Decision made free from immediate direction or supervision.3. Decision made after comparing and evaluating possible courses of conduct - must include more than just use of established techniques, procedures or application of specific standards. 4. Examples of “discretion and independent judgment” include:

(a) Authority to formulate, affect, interpret, implement management policies or practices.

(b) Carries out major assignments.(c) Work substantially affects business operations.(d) Authority to commit the company resources.(e) Authority to waive policies & procedures.(f) Authority to negotiate with & select vendors.(g) Consults or provides expert advice to management.(h) Involved in planning business objectives.(i) Investigates & resolves significant issues.(j) Represents company in grievances or complaints.


Discretion and independent judgment does not include: 1. Applying well-established techniques, procedures or

specific standards described in manuals or other sources.2. Clerical or secretarial work.3. Recording or tabulating data.4. Performing mechanical, repetitive, recurrent or routine

work.


What is required for the PROFESSIONAL exemption? 1. Paid on a salary basis at least $455* per week; and2. Primary duty is:

(a) Knowledge of an advanced type in field of science or learning customarily requiring prolonged, specialized intellectual instruction (Learned Professional); or

(b) Invention, imagination, originality or talent in field of artistic or creative endeavor (Creative Professional).


There is no minimum salary for doctors, lawyers and teachers.


What is required for the Learned Professional? 1. Advanced knowledge used to analyze, interpret or make deductions from varying facts; beyond high school knowledge.2. Refers to traditional professions.3. Specialized academic training is prerequisite to entrance into the profession.4. Excludes occupations where the individual only has general knowledge and skills gained through apprenticeship or performance of routine mental, manual, mechanical or physical processes.

Examples: Law, theology, medicine, pharmacy, accounting, teaching architecture, engineering, actuarial computation , physical sciences, chemical sciences and biological sciences.


What is required for the Creative Professional? 1. Work must be in recognized field of artistic or creative

endeavor (music, writing, acting, graphic arts).2. Requires invention, imagination, originality or talent to

complete the creative work.3. Determinations are made on a case-by-case basis.

Examples: Musicians, writers, actors, graphic artists and some journalists (on-air performance, investigative interviews , write editorials, opinion or commentary).


What is required for the OUTSIDE SALESPERSON exemption? 1. Primary duty is:

(a) Making sales; or(b) Obtaining orders or contracts for services or for use of facilities for which consideration is

paid; and2. Who is customarily and regularly engaged away from

the employer’s place of business.


What does it meant to “make sales” or “obtain orders”?1. Sales involves transfer of title to tangible property.2. Includes obtaining orders or contracts, consignments, shipment for sale, or other disposition.3. Work that is incidental to or done in conjunction with sales is part of exempt work.4. Sales done at customer’s place; can include hotel rooms or trade shows.5. Promotional work done in conjunction with outside sales or solicitations is exempt.6. Drivers who sell and deliver may qualify only if their primary duty is to make sales.


What is required for the COMPUTER PROFESSIONAL exemption? 1. Minimum salary of $455 per week or $27.63 per hour; and2. Primary duty is:

(a) Application of systems analysis techniques and procedures; or

(b) Design, development, documentation, analysis, creation, testing or modification of systems or programs; or

(c) Design, development, documentation, analysis, creation, testing or modification of operating systems; or

(d) Any combination of above.


Additional information about the COMPUTER PROFESSIONAL exemption: 1. Job titles not determinative; focus is on whether individual performs duties/functions.2. Exemption does not include employees engaged in manufacture or repair of hardware or related equipment.3. Individuals who simply use computers or programs do not qualify.4. Help Desk personnel do not qualify for this exemption.

Note: The New York State Labor Law does not recognize an exemption for the computer employee. In NY many computer employees, meeting the requirements for the Federal exemption may qualify under the Administrative exemption.


Which exemption do employers most often misunderstand (and therefore misclassify employees under)? The Administrative Exemption.

Note:


What is so complicated about the ADMINISTRATIVE Exemption?


March 13, 2014 – President Obama issued a Presidential Order directing the U.S. D.O.L. to update the FLSA regulations defining which white collar employees are exempt from the FLSA minimum wage and overtime requirements.

The DOL was directed to “modernize” and “simplify” the regulations while ensuring that the FLSA’s protections are fully implemented.

July 6, 2015 – U.S. D.O.L. issues Notice of Proposed Rule Making to revise FLSA regulations.

New Proposed FLSA Regulations:

The new proposed regulations will:1. Increase minimum salary for exemptions from $455/week to $970.00* per week; and 2. Increase the minimum annual salary for highly compensated employees from $100,000/ year to $122,148/per year.

Note: The proposed regulations provide an estimated annual salary. The exact annual salary amount will be included in the final regulations but is expected to be around the $970.00 amount.


The new proposed regulations seek comment on: 1. Indexing the minimum salary amount to

the consumer price index (CPI) or to a fixed percentile of wage earnings for full-time salaried employees;

2. Including non-discretionary bonuses in determining minimum salaries; and

3. Whether further modifications to the duties test for the Executive, Administrative and Professional exemptions are required in light of the increase to the minimum salary.


The DOL has long recognized the employee’s salary level as the “single best test” of exempt status.

Indexing the minimum salary amount to the CPI or to a fixed percentile of wage earnings for full-time salaried employees will prevent the minimum salary lagging behind the economy and will provide a “bright-line,” effective means of distinguishing between truly exempt employees and those who should be entitled to FLSA’s minimum wage and overtime protections.


The DOL is “considering” whether to allow employers to include non-discretionary bonuses in determining whether the employee meets the minimum salary requirement.

Non-discretionary bonuses are currently included in determining whether the employee meets the minimum salary for the Highly Compensated Employee test – as that is an annual test.


If non-discretionary bonuses are permitted to be counted in determining whether the employee meets the minimum salary requirement, they are likely to be subject to several limitations:1. The bonuses are paid on no less than a

monthly basis.2. The bonuses constitute no more than 10% of

the employee’s overall compensation.


The DOL is seeking input on whether further modifications to the duties test for the Executive, Administrative and Professional exemptions are required in light of the increase to the minimum salary. Potential revisions to the duties test may include:1. Limiting the amount of time exempt employees can spend performing non-exempt work (50% of the time).2. Adding specific examples of how the exemptions will apply to particular occupations.


What can employers do to limit exposure on employee misclassification and prepare for anticipated regulation changes?

1. Self Audit – Review your classification of all employees to ensure that all employees are properly classified – Reclassify now. 2. Require all employees, regardless of classification, to keep accurate records of the hours they work each week.3. Limit the need to work in excess of 40 hours in a workweek.4. Maintain Commissioned Salesperson Agreement.5. Have NYS Notice of Pay Rate/Pay Day on file.


NYS Wage Order for the Hospitality Industry

February 24, 2015 Commissioner of NYS DOL Issued an Order adopting the findings of the NYS Wage Board to take effect December 31, 2015. The changes are intended to simplify the tip credit.

One tip credit rate applicable to food service workers, service workers and service employees in resort hotels.

Tip credit for all tipped employees will be $1.50/hour – making the minimum wage for all tipped employees $7.50/hour ($9.00 - $1.50).

If NYS enacts a separate minimum wage for NY City, the minimum wage for tipped employees in NYC will increase by $1.00/hour.

The Tip Credit:

Calculating the Overtime Rate for Tipped Employees

When an employer is taking a tip credit the employee’s overtime rate shall be the employee’s regular rate of pay before subtracting any tip credit, multiplied by 1-1/2 times, minus the tip credit.

($9.00 x 1.5) - $1.50 = $12.00/hour

The Tip Credit:

Increase Effective December 31, 2015

1. $11.20/ week for Employees working more than 30 hours/week.

2. $8.85/week for Employees working more than 20 hours/week but not more than 30 hours/week.

3. $5.35/week for employees working 20 hours/week or less.

Uniform Maintenance Pay:

New Notice is Required prior to December 31, 2015, for All Employees for whom the Employer is taking the Tip Credit.

Notice must contain the employee’s regular hourly rate of pay, overtime hourly rate of pay, the amount of tip credit – if any – to be taken from the basic minimum hourly rate of pay, and the regular pay day.

The notice must also state that extra pay is required if tips are insufficient to bring the employee up to the basic minimum hourly rate.

Written Pay Notice:

The practice by which directly tipped employees give a portion of their tips to other service employees or food service workers who participated in providing service to the customer, and keeps the balance.

Tip Sharing:

The practice by which the tip earnings of directly tipped employees are intermingled in a common pool and then redistributed among directly tipped and indirectly tipped employees.

Tip Pooling:

Eligibility is based upon job DUTIES, not job titles.

Eligible employees must perform or assist in performing personal service to patrons at a level that is a principal and regular part of their duties and is not merely occasional or incidental.

Who is Eligible to Participate in Tip Sharing

or Tip Pooling?

Wait staff; Counter Personnel who serve food or beverages to customers; bus persons; bartenders; service bartenders; bar backs; food runners; captains who provide direct food service to customers; and hosts who great and seat guests.

Eligible employees must perform or assist in performing personal service to patrons at a level that is a principal and regular part of their duties and is not merely occasional or incidental.

Employers may not require directly tipped employees to contribute a greater percentage of their tips to indirectly tipped employees through tip sharing or tip pooling than is customary and reasonable.

Examples of Occupations Eligible to Participate in

Tip Sharing or Tip Pooling:

Directly Tipped employees may voluntarily share their tips with other employees who participated in providing service to the customers.

Employer may require and may set the percentages the directly tipped employee must share with each indirectly tipped employee who participated in providing service to the customers.

Tip Sharing Rules:

Directly Tipped employees may mutually agree to pool their tips and redistribute them between the directly tipped participants and other indirectly tipped employees who participated in providing service to the customers.

Employer may require food service workers to participate in a tip pool and may set the percentage to be distributed to each occupation from the tip pool. Only food service workers may receive distributions from the tip pool.

Tip Pooling Rules:

Employers who operate a tip pooling or tip sharing system must establish, maintain and preserve, for at least 6 years, records which include: 1. A daily log of tips collected by each employee on each shift, whether by cash or credit card; and2. A list of occupations that the employer deems eligible to participate in the tip sharing or tip pooing system; and 3. The share of tips that each occupation is scheduled to receive from tip sharing or tip pooling; and4. The amount of tips that each employee receives from the tips share or tip pool, by date.

These records must be available for review by participants in the tip share or tip pool.

Record Keeping Requirements for Tip Pooling and Sharing:

Employers are prohibited from demanding, accepting or retaining any portion of an employee’s gratuity.

There is a “rebuttable presumption” that any charge in addition to charges for food, beverages and lodging and other specified materials or services is a gratuity. This included “service charges” and “food service charges.”

Employers who make such charges are required to establish, maintain and preserve for at least 6 years records of such charges and the disposition of those charges.

These records must be available for review by participants in the tip share or tip pool.

Service Charges:

Employers are prohibited from demanding, accepting or retaining any portion of an employee’s gratuity.

Charges for the “Administration” of a banquet or special function, that are not intended to be gratuities must be clearly identified as such and the customer must be clearly informed that the charge is not a gratuity and will not be distributed to food service workers.

This notice to customers must appear on the customer contract/agreement, any menus or price lists. The notice must be in ordinary easy to understand language and it must be in font size similar to the surrounding text, but not less than 12 point font.

Administrative Charges:

Modify NYS Human Rights Law definition of “Employer” to include all employers (not just those with 4 or more employees) for purposes of sexual harassment claim.

Revise NYS Human Rights Law to permit recovery of attorney’s fees to prevailing party in administrative or court proceeding based on sex discrimination. For a prevailing respondent or defendant to recover it must make a motion and show that the action was “frivolous.” Frivolous means (1)commenced or continued in bad faith to harass, maliciously injure or delay or prolong proceeding; or (2) commenced in bad faith without any reasonable basis.

Adds familial status to the list of protected categories under the NYS HRL.

Requires employers to provide reasonable accommodations for “pregnancy related conditions.” Pregnancy related conditions are those related to pregnancy or child birth that inhibit the exercise of a normal bodily function or that is demonstrable by medically acceptable clinical or laboratory diagnostic techniques.

Revisions to NYS Non-Discrimination Laws:

Documents

Presented By: Heather A. Giambra, Esq., Schröder, Joseph & Assoc., LLP