8/20/2014

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FLSA and

OFCCP

Update: Tips, Minimum

Wage and

More

John L. Knorek &

Christine K.

David

FLSA Update: Topics We Will Cover

• FLSA Generally

• Tip Credit

• Tip Pool

FLSA• Applies to employers in nearly all workplaces

• Protects non-exempt workers from substandard wages and oppressive working hours

• Employers must pay minimum wage (Section 6(a) of FLSA)

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Minimum Wage

• HRS § 387-2: Hawaii current minimum wage is $7.25 per hour

• Minimum wage will go up to $7.75 on January 1, 2015 – Get ready!

How Does the DOL Regulate Tip

Retention Through the FLSA?• Simple Answer: Tips are considered part of wages when an employer takes a tip credit.

• Section 3(m) of the FLSA defines the term “wage” and allows an employer to take a tip credit to meet the minimum wage rate specified in Section 6(a).

Tip Credit: What is it?

• Define: The hourly wage of a tipped employee may be deemed to be increased on account of tips if the employee is paid not less than 25 cents below the minimum wage by the employer AND the combined amount the employee receives from the employer and in tips is at least 50 cents more than the minimum wage. HRS § 387-2.

• Translate: You can pay a “tipped employee” $7.00 per hour as long as that employee ultimately receives at least $7.75 per hour after tips.

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Tip Credit: Increases in 2015

• On January 1, 2015, the tip credit amount is going up to 50 cents and the combined amount the employee receives must be at least $7 more than the new $7.75 minimum wage.

• This means that you can pay a “tipped employee” $7.25 per hour as long as that employee ultimately receives at least $14.75 per hour after tips.

Hawaii Average Wage

• The average wage including tips for servers in Hawaii is $13.91.

▫ BLS May 2013

Tip Credit: What Is Required?

• You can only take a tip credit for “tipped employees.”

• Written notice to employees at their time of hire:

▫ FLSA’s tip provisions

▫ You will be claiming a tip credit

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Who Is a Tipped Employee?

• Tipped employees are those who customarily and regularly receive more than $30 per month in tips, are not exempt from the overtime provisions of the FLSA, and do not meet the requirements of salaried employees.

• (1) servers; (2) counter personnel who serve customers; (3) busboys/girls; (4) bartenders; and (5) barbacks

• Some courts say that host/hostesses are tipped employees, but there is no clear consensus.

What Does “Customarily and Regularly

Receives Tips” Mean?• The FLSA states that “customarily and regularly” signifies a frequency which must be greater than occasional but less than constant – not very helpful!

• Most courts apply a customer interaction test to determine whether an employee customarily and regularly receives tips.

Who Is a Non-Tipped Employee?

• (1) janitors; (2) dishwashers; (3) chefs or cooks; and (4) laundry room attendants

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Voluntary Tip Sharing• Occurs when a employee voluntarily decides to share his tips with other employees

• Not addressed by the FLSA

• Need to show that employees were not coerced in any way to share tips

▫ If an employer’s actions “might well” dissuade a reasonable employee from not sharing tips, then the tip sharing is not free from coercion.

Mandatory Tip Pool: What Is It?

• Mandatory tip pooling occurs when employees are required by their employer to pool their tips together, and the pooled money is then divided and redistributed according to a system.

• Tip pools allow employees who do not typically receive as many tips directly from customers to share in the benefits of good service.

Mandatory Tip Pool: What Is Required?

• If the employer takes a tip credit (for “tipped employees”), it may not include “non-tipped employees” or managers in the tip pool

• Employers must give advance notice of the tip pooling arrangement and of any required tip pool contribution amount

▫ No requirement that the notice must be in writing under federal or state law, but it is advisable

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Disagreement: Who Can Be Included

In the Mandatory Tip Pool?• Section 3(m) states that when an employer

takes a tip credit, an employer must give employees notice of this, and all tips received by the employees must have been retained by the employees, but an employer may have a mandatory tip pool for “tipped employees.”

• There is disagreement between the DOL and the Ninth Circuit regarding whether this means that when an employer does not take a tip credit, it can include any employees it chooses in the tip pool.

Cumbie v. Woody Woo, Inc. and DOL

Response

• Cumbie v. Woody Woo, Inc. (9th Cir. 2010)▫ Facts of case▫ No violation where the employer did not take a tip credit and tips only belong to employees after the tips are redistributed from the tip pool

• 2011 Regulations Amending the FLSA▫ “The employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit, for any reason other than … [a]s a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool.”

▫ Valid mandatory tip pools can only include those employees who customarily and regularly receive tips.

Or. Rest. & Lodging v. Solis and DOL

Response

• Or. Rest. & Lodging v. Solis (D. Or. 2013)▫ Facts of case▫ The Court held that the DOL’s 2011 Regulations are invalid because Congress has given employers a choice: either pay the full minimum wage free and clear of any conditions or take a tip credit and comply with the tip retention requirements.

• DOL Fact Sheet #15▫ The DOL will not enforce its tip retention requirements against any employer that has not taken a tip credit in jurisdictions within the Ninth Circuit while the government considers appeal.

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What Does This All Mean For You?

• You can only take a tip credit for “tipped employees.”

• You can always include front of the house, “tipped employees” in a mandatory tip pool even if you take a tip credit.

• If you don’t take a tip credit, you can include back of the house “non-tipped employees” (such as kitchen staff) and managers in a mandatory tip pool while the government is considering its appeal of the Oregon restaurants case – BUT you still may be subject to investigation by the DOL and will have to provide a defense that could be costly.

What is the liability?• Roy’s Restaurants▫ After an investigation, the DOL found that Roy’s unlawfully included “non-tipped” kitchen staff in a mandatory tip pool while taking a tip credit.

▫ Roy’s agreed in a settlement to pay $225,000 in tips and back wages to 326 servers.

• Potential Damages▫ An employer may be liable for refunding back wages for the tip credit taken and possibly the tips that employees put into an invalid tip pool

▫ An employer may also be liable for liquidated damages in an amount equal to the amount of actual damages unless it can show that it acted in good faith an under the reasonable belief that it was in compliance with the FLSA.

Q: What’s New at

OFCCP?

A: PLENTY!!

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THE BASICS

• Executive Order 11246, prohibits discrimination and requires affirmative action to ensure that all employment decisions are made without regard to race, color, religion, sex or national origin.

• Section 503 of the Rehabilitation Act of 1973, prohibits discrimination and requires affirmative action in the employment of qualified individuals with disabilities.

• The Vietnam Era Veterans' Readjustment Assistance Act of 1974, as amended prohibits discrimination against specified categories of veterans protected by the Act and requires affirmative action in the employment of such veterans.

Executive Order 13688

• Effective January 1, 2015, a minimum wage of $10.10 per hour for most non-tipped workers on new or renegotiated federal contracts entered into after February 12, 2014.

• Beginning January 1, 2016, and annually thereafter, the minimum wage amount will be as determined by the Secretary of Labor.

Fair Pay and Safe Workplaces

Executive Order (7/31/14)

Requires contractors to:

• (1) disclose recent violations of various workplace laws before being awarded federal contracts;

• (2) provide wage notifications to employees and notify independent contractors of their non-employee status; and

• (3) bar contractors from requiring employees to sign pre-dispute arbitration agreements.

• This is slated to take effect for new contractors in 2016.

• Before awarding contracts of $500,000 or more, contracting officers are required to consider these disclosures to determine whether the contractor “is a responsible source that has a satisfactory record of integrity and business ethics.”

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Executive Order 11246 (7/21/14)

•President Obama amended EO 11246 to add protections for sexual orientation and gender identity.

EXECUTIVE ORDER 13496:

• Federal contractors and subcontractors are required to inform employees of their rights under the National Labor Relations Act (NLRA), the primary law governing relations between unions and employers in the private sector.

• The notice, prescribed in the Department of Labor's regulations, informs employees of Federal contractors and subcontractors of their rights under the NLRA to organize and bargain collectively with their employers and to engage in other protected concerted activity.

New OFCCP Initiatives

• What: Submit summary pay data on their workforces broken out by race, sex and ethnicity to the OFCCP.

• Who: Companies that file EEO-1 reports with the federal government, have more than 100 employees and hold federal contracts or subcontracts worth $50,000 or more

• When: ???

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• As proposed, the data collection tool, called the Equal Pay Report (EPR, is an annual supplement to the EEO-1 Report.

• Annual report to be filed in the first quarter of every year

• Report W-2 earnings for all employees aggregated by EEO-1 category – so employers must report on total comp, as opposed to base comp like most employers include in AAP submissions to OFCCP

• Report aggregated hours for all non-exempt employees by EEO-1 category – and for all exempt employees if tracked by the employer

NEW RULES

As of March 24, 2014• Include the veteran/disabled tagline in all job

advertisements and postings: •

� EEO Employer/Vet/Disabled� EOE/M/F/Vet/Disabled� EOE/Minorities/Females/Veteran/Disabled

• Post all non-temporary positions that are for more than three days and not senior management with the Hawaii ESDS/HireNet Hawaii and include:

▫ The location and name of each establishment on the state;▫ Contact information for each official at each location

responsible for the posting;▫ Verify that the Employer is a federal contractor (e.g.

“VEVRAA Federal Contractor”) on the posting; and▫ Request Hawaii ESDS/HireNet Hawaii to send the contractor

priority referrals of protected veterans.

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EEO IS THE LAW

• OFCCP will post a notice on its Web site to let contractors know when the new poster is available for use. For now, use the existing poster.

• If any employees work remotely, notify them electronically of required posters and notices.

• Include the required flow down language in BOLD PRINT in all subcontracts and purchase orders.

▫ This contractor and subcontractor shall abide by the requirements of 41 CFR 60-1.4(a), 60-300.5(a) and 60-741.5(a). These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin. Moreover, these regulations require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability.

◦ http://www.dol.gov/ofccp/regs/compliance/faqs/VEVRAA_faq.htm#Q27

Effective Plan Years After 3/24/14 • Establish a benchmark for the representation of veterans and a utilization goal for the representation of IWD

• Solicit voluntary self-identification of veterans and disability status from applicants as well as offerees

• Prepare annual metrics regarding the number of veteran and IWD applicants and hires, and a comparison to the VEVRAA benchmark and the Section 503 goal

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• Conduct an annual self-assessment of a contractor's outreach and recruitment efforts, including an evaluation of the applicant and hiring metrics developed from the self-identification data

• Take steps to determine whether and where impediments to hiring IWDs exist, and to develop and execute action-oriented programs to correct any identified problem areas

Now the drill down…• Collect data on protected veteran and disabled applicants and

annually analyze this information against the 7% utilization

goal for individuals with disabilities and the 8% benchmark for employment of veterans (or utilize a five factor alternative

method to do so);

• Retain the report and data for three years;

• Collect and analyze the following for veterans and disabled

individuals:

▫ The number of applicants who self-identified as veterans or individuals with disabilities;

▫ The total number of job openings and the total number of jobs filled;

▫ The total number of applicants for all jobs;

▫ The number of veterans or individuals with disabilities hired;

▫ The total number of applicants hired; and

• Survey existing workforce for disability self-identification once every five (5) years.

Recordkeeping Obligations• Mandatory 503 Form: Contractors are mandated to use a form

supplied by OFCCP to invite applicants to self-identify as individuals with disabilities.

• No Mandatory VEVRAA Form: Unlike the Disability Rule, the Veterans Rule does not require contractors to use a mandatory form to invite applicants to self-identify themselves as protected veterans at the pre-offer stage. Contractors who develop their own forms, however, must include certain statements to applicants, including that the form is voluntary, the information supplied will be kept confidential, and completion of the form will not subject the applicant to any adverse treatment. A Sample is provided by OFCCP.

• Solicit Simultaneous with Race and Gender: Provide to each applicant when the applicant applies and at the same time as when they solicit demographic information for females and minorities.

• Not Part of Application: Must be separate from the application, but may be included in the contractor's application materials.

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• Visual Self-Identification Permitted: If individuals with disabilities opt not to self-identify their disabled status, a contractor can use visual

identification to complete the information if the contractor either observes the disability (e.g., the individual is in a wheelchair) or the applicant makes it clear

during the process that they are disabled (e.g., the applicant requests an accommodation for completing the application or during the interview).

Contractors should not guess about disability status or assume that an applicant is disabled just because he or she "looks sickly.“

• Pre-Offer: Only Ask Protected Veteran Status: Contractors can only ask an applicant if he or she is a "protected veteran" and not ask him or her to

disclose the particular category of protected veteran.

• Post-Offer Invitation: Contractors must continue to invite applicants to

self-identify their veteran or disabled status after they are offered employment but before their first day of work. As with the pre-offer invitation, contractors

will be required to use OFCCP's invitation for disability information, but they can use their own form that meets certain requirements to invite protected

veterans to self-identify their veteran status.

Updated Categories of Protected

Veterans:• In the Veterans Rule, OFCCP replaced the "Other Protected Veterans" category with "Active-Duty Wartime or Campaign Badge Veteran" to make the definition more descriptive and avoid the confusion that the "Other Protected Veteran" category includes every veteran that is not in one of the other three protected veteran categories (i.e., "Disabled Veteran," "Armed Forces Service Medal Veteran," or "Recently Separated Veteran"). As a result, contractors will need to update their post-offer voluntary self-identification form for veterans to include the new category.

Amend your letters and forms

• To subcontractors and suppliers;

• To Labor Unions

• To Outreach Agencies

•Update your on-line forms

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Can’t You Just Wait to Comply?

MAHALO and Thank You