Ohio's Minimum Wage To Increase on January 1, 2021 and DOL amends FLSA's Tip Pooling Rules

At the end of September, the Ohio Department of Commerce announced that Ohio's minimum wage would increase again on January 1, 2021.  Ohio employers will also need to update the mandatory poster conveying the new wage and employee rights under Ohio's wage laws.  The new minimum wage has increased by a dime to $8.80/hour and a nickel for tipped employees to $4.40/hour plus tips.  With respect to tipped employees, the federal Department of Labor on Tuesday announced that it had issued a final regulation governing tip pools that will take effect in 60 days after publication in the Federal Register (assuming that the incoming administration does not rescind or postpone it before then).   As in prior drafts, employers who take the tip credit must promptly pay the tips and cannot require them to be shared with back-of-the-house workers or managers.  However, if the employer pays everyone at least the minimum wage and does not take the tip credit, then the employer may require that tips be shared with back-of-the-house employees (like cooks and dishwashers), but not with management.    Happily, managers may keep tips that are given to them directly by customers for services provided directly by them.  

The new FLSA regulation more explicitly regulates the meaning of "keeping" tips to restrict the delay in paying employees who participate in a tip pool. 

 (2) Full and prompt distribution of tips. An employer that facilitates tip pooling by collecting and redistributing employees’ tips does not violate section 3(m)(2)(B)’s prohibition against keeping tips if it fully distributes any tips the employer collects no later than the regular payday for the workweek in which the tips were collected, or when the pay period covers more than a single workweek, the regular payday for the period in which the workweek ends. To the extent that it is not possible for an employer to ascertain the amount of tips that have been received or how tips should be distributed prior to processing payroll, tips must be distributed to employees as soon as practicable after the regular payday.

The new regulation also governs and provides examples of when a tip credit can be taken for an employee who dual roles (as a tipped server and a non-tipped regular employee).

(e) Dual jobs. (1) In some situations an employee is employed in a dual job, as for example, where a maintenance person in a hotel also works as a server. In such a situation the employee, if he or she customarily and regularly receives more than $30 a month in tips for his or her work as a server, is a tipped employee only with respect to his or her employment as a server. The employee is employed in two occupations, and no tip credit can be taken for his or her hours of employment in the occupation of maintenance person.  

(2) Such a situation is distinguishable from that of an employee who spends time performing duties that are related to his or her tip-producing occupation but are not themselves directed toward producing tips. For example, a server may spend part of his or her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses. Likewise, a counter attendant may also prepare his or her own short orders or may, as part of a group of counter attendants, take a turn as a short order cook for the group. An employer may take a tip credit for any hours that an employee performs related, non-tipped duties contemporaneously with his or her tipped duties, or for a reasonable time immediately before or after performing the tipped duties.  

The new regulation also modifies rules for calculating tip credits and overtime compensation for tipped employees.

531.59 The tip wage credit. (a) In determining compliance with the wage payment requirements of the Act, under the provisions of section 3(m)(2)(A) the amount paid to a tipped employee by an employer is increased on account of tips by an amount equal to the formula set forth in the statute (minimum wage required by section 6(a)(1) of the Act minus cash wage paid (at least $2.13)), provided that the employer satisfies all the requirements of section 3(m)(2)(A). This tip credit is in addition to any credit for board, lodging, or other facilities which may be allowable under section 3(m). (b) As indicated in § 531.51, the tip credit may be taken only for hours worked by the employee in an occupation in which the employee qualifies as a “tipped employee.” Pursuant to section 3(m)(2)(A), an employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer’s use of the tip credit of the provisions of section 3(m)(2)(A) of the Act, i.e.: The amount of the cash wage that is to be paid to the tipped employee by the employer; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee; that all tips received by the tipped employee must be retained by the employee except for a tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section. The credit allowed on account of tips may 141 be less than that permitted by statute (minimum wage required by section 6(a)(1) minus the cash wage paid (at least $2.13)); it cannot be more. In order for the employer to claim the maximum tip credit, the employer must demonstrate that the employee received at least that amount in actual tips. If the employee received less than the maximum tip credit amount in tips, the employer is required to pay the balance so that the employee receives at least the minimum wage with the defined combination of wages and tips. With the exception of tips contributed to a tip pool limited to employees who customarily and regularly receive tips as described in § 531.54, section 3(m)(2)(A) also requires employers that take a tip credit to permit employees to retain all tips received by the employee.

 

§ 531.60 Overtime payments. When overtime is worked by a tipped employee who is subject to the overtime pay provisions of the Act, the employee’s regular rate of pay is determined by dividing the employee’s total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by the employee in that workweek for which such compensation was paid. (See part 778 of this chapter for a detailed discussion of overtime compensation under the Act.) In accordance with section 3(m)(2)(A), a tipped employee’s regular rate of pay includes the amount of tip credit taken by the employer per hour (not in excess of the minimum wage required by section 6(a)(1) minus the cash wage paid (at least $2.13)), the reasonable cost or fair value of any facilities furnished to the employee by the employer, as authorized under section 3(m) and this part 531, and the cash wages including commissions and certain bonuses paid by 142 the employer. Any tips received by the employee in excess of the tip credit need not be included in the regular rate. Such tips are not payments made by the employer to the employee as remuneration for employment within the meaning of the Act. 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney. 

New Year and New Ohio Minimum Wage Poster

For those of you who took an extra long holiday weekend, the new year also brings an adjustment in your payroll systems to reflect a 15 cent increase in Ohio’s minimum wage to $8.30/hour and (probably in February) to reflect reduced payroll withholdings at the federal level.  The New Year also brings the requirement to update your Ohio minimum wage posters in your break rooms and electronic handbooks.   I’m always surprised at how many employers remember to adjust their wages but not their posters.   So, finish your cup of coffee and print out the poster from this link:  http://www.com.ohio.gov/documents/dico_2018MinimumWageposter.pdf

And we’ll see if (or how long) I can stick with my New Year’s resolution to blog a couple times each week like in my youth.  (Yes, I’m a luddite that still prefers the web and emails to Facebook, Instagram, Texting or Twitter . . . . . .)

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Supreme Court Rejects Challenge to White Collar Exemptions in Minimum Wage Statute

This morning, a divided Ohio Supreme Court rejected a constitutional challenge to Ohio’s minimum wage statute on the basis that the General Assembly’s incorporation of the FLSA exemptions into the Ohio statute violated the Ohio constitution.  Haight v. Minchak, Slip Opinion No. 2016-Ohio-1053.  In particular, the Court held that the General Assembly’s incorporation of the FLSA’s white collar and other minimum wage exemptions into the statutory definition of “employee” at Revised Code § 4111.14 did not “clearly conflict with or restrict” the meaning of “employee” in the 2006 voter-initiative Fair Minimum Wage Amendment to the Ohio Constitution at Article II, section 34a.   The plaintiffs had been commissioned sales people who alleged that they were not paid the mandatory minimum wage by their employer, which, in turn, asserted that they were not covered by Ohio or federal minimum wage statutes as exempt commissioned salespeople. While the FLSA contains an exemption for commissioned sales employees, the Ohio constitutional provision did not.   As previously reported here, the Montgomery County Court of Appeals ruled in favor of the employees, which then brought all white-collar exemptions in the minimum wage statute into question.

The dispute centers on certain language in the FMWA in Article II:

“[E]mployer,” “employee,” “employ,” “person” and “independent contractor” have the same meanings as under the federal Fair Labor Standards Act or its successor  law, except that “employer” shall also include the state and every political subdivision and “employee” shall not include an individual employed in or about the property of the employer or individual’s residence on a casual basis. Only the exemptions set forth in this section shall apply to this section.

* * *

This section shall be liberally construed in favor of its purposes. Laws may be passed to implement its provisions and create additional remedies, increase the minimum wage rate and extend the coverage of the section, but in no manner restricting any provision of the section or the power of municipalities under Article XVIII of this constitution with respect to the same.  (emphasis added).

The FMWA also contained a number of exemptions from the statute which did not mirror the FLSA exemptions and did not, for instance, include any of the white collar exemptions for administrative, professional or management employees.   When the General Assembly passed implementing legislation in 2007, it defined “employee” to include both the FLSA definition of employee and to also include the exemptions to the minimum wage which existed in the FLSA’s § 213 (i.e., the white- collar exemptions).  

The plaintiffs argued that the exclusion of the white collar exemptions violated the constitutional admonition that “only the exemptions set forth in this section shall apply . . . “  However, the employer asserted that the FMWA broadly incorporated the FLSA and would have specified which specific exemptions to reject if it had not meant to incorporate all of the white-collar exemptions.   

The Court noted that legislation is presumed to be constitutionally valid unless it appears “beyond a reasonable doubt that the legislation and constitutional provisions are clearly incompatible.”   In this case, the FMWA said that it broadly incorporated “meanings” (plural) from the FLSA, which means that more than one definition applies.  This could include both definitions and exemptions (and, thus, creates a reasonable doubt).  Further, it would be logical to assume that the FMWA did not list exemptions which already existed in the FLSA because it impliedly included them.   Indeed, at least one publication from 2006 distributed by at least one group advocating the passage of the FMWA implied as much.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Injured Firefighter Collects Unemployment During Unpaid Sick Leave

Near the end of December, the Ohio Court of Appeals affirmed the award of unemployment compensation to an injured firefighter who was placed on unpaid sick leave after he exhausted light duty assignments upon reaching maximum medical improvement under the applicable bargaining agreement and after he was denied permanent disability compensation.  Akron v. Dir., Ohio Dept. of Job & Family Servs., 2015-Ohio-5376.  The Court agreed that he was able to work in light duty positions and that he had had been available for work while his union and the employer discussed other possible light duty assignments.   The Court rejected the employer’s argument that the employee had not been available for work because he had not searched for other jobs after being placed on unpaid sick leave.  The employee was not required to produce evidence of his job search activities unless the Director of Job and Family Services requested it and no such request was ever made or required to be made.   Finally, the Court rejected the argument that the employee’s right to unemployment compensation had been waived by the bargaining agreement because the agreement did not made his placement on an indefinite sick leave.

While the unemployment compensation statute precludes contractual waivers of unemployment benefits, the courts have recognized a common law waiver when a union negotiates termination benefits:  

When an employee has a termination package pursuant to a collective-bargaining agreement between [his] union and the employer, the employee is deemed to have accepted the benefits of the package, and waived [his] right to benefits, in return for [his] agreement to be terminated at a certain time. . .  . “The termination when a collective-bargaining agreement exists is deemed to have been for just cause, rendering the employee statutorily ineligible for unemployment compensation.

However, this exception did not apply in this case because the employee was not terminated in accordance with a collectively-bargaining retirement package.   Instead, he was placed indefinitely on unpaid sick leave.  “There is no indication as to how long Mr. Gardner could have remained on this leave status and no indication in the record that this leave status was required by the terms of any agreement between his union and the City.”   Accordingly, the Court refused “ to extend common law waiver to the circumstances present in this case, where there is no termination package at issue, where the leave at issue could last indefinitely, and where the leave at issue was not contemplated as part of any collectively bargained agreement in the record.”

 On a completely different topic, Ohio has a new minimum wage poster for employers and wage for employees to coincide with the new year.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can be changed or amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Divided Ohio Appellate Court Rejects Incorporation of FLSA Exemptions into Ohio Minimum Wage Constitutional Amendment

On Friday, a divided Montgomery County Court of Appeals held that Ohio Revised Code §4111.14(B)(1) was – beyond a reasonable doubt --  an unconstitutional attempt by the General Assembly to restrict §34a of the Ohio Constitution and declared it “invalid.”  Haight v. Cheap Escape Co., No. 2014-Ohio-2447.  In that case, the plaintiffs were employed as outside salesmen by the employer and claimed that they were not properly paid the minimum wage as required by 2006’s Voter Initiative 2, which was incorporated into the Ohio constitution at §2.34a.  In that constitutional provision, the “meaning” of “employee” is the same as in Fair Labor Standards Act.  The employer raised as a defense that ORC §4111.14 incorporated the FLSA minimum wage exemptions, which includes exemptions for professional, managerial, and administrative employees and outside salesmen like the plaintiffs.  The plaintiffs then successfully challenged the constitutionality of §4111.14 on the grounds that §203 of the FLSA defines “employee” as – with certain exceptions -- “any individual employed by an employer” and could not include the FLSA exemptions because §34a restricted exemptions  to those exemptions contained in its own provisions (for family members and disabled employees) and the General Assembly from narrowing the reach of its provisions.

The Court recognized that §213 (and other provisions) of the FLSA contained certain exemptions from the FLSA’s minimum wage.  However, even if individuals are exempt from the FLSA’s minimum wage provisions, they remain “employees” as defined by the FLSA.  The Court’s majority found that the intent of §34a was to use the FLSA’s broad definition of “employee” without the FLSA’s many exemptions and that it created its own, very narrow exemptions to the state minimum wage requirements:

As used in this section: "employer," "employee," "employ," "person" and "independent contractor" have the same meanings as under the federal Fair Labor Standards Act or its successor law, except that "employer" shall also include the state and every political subdivision and "employee" shall not include an individual employed in or about the property of the employer or individual's residence on a casual basis. Only the exemptions set forth in this section shall apply to this section.

             . . . .

This section shall be liberally construed in favor of its purposes. Laws may be passed to implement its provisions and create additional remedies, increase the minimum wage rate and extend the coverage of the section, but in no manner restricting any provision of the section or the power of municipalities under Article XVIII of this constitution with respect to the same.

Section 4111.14 acknowledges that “employee” has the same meaning as in the FLSA, but then specifically states:

“Employee” means individuals employed in Ohio, but does not mean individuals who are excluded from the definition of “employee” under 29 U.S.C. 203(e) [the Fair Labor Standards Act] or individuals who are exempted from the minimum wage requirements in 29 U.S.C. 213 and from the definition of “employee” in this chapter.

The Court rejected the employer’s argument that the “meaning” of employee is broader than the “definition” of employee under §203 of the FLSA and, therefore, the statute does not conflict impermissibly with the constitution:

Section 34a’s statement that “employee” and other terms have “the same meanings as under the federal Fair Labor Standards Act,” coupled with its statement that “[o]nly the exemptions set forth in this section shall apply to this section,” preclude interpreting Section 34a in the manner advocated by the owners of Cheap Escape. The exemptions from minimum wage requirements set forth in 29 U.S.C. 213 do not alter the definition of “employee” set forth in 29 U.S.C. 203. Rather, the exemptions provide that minimum wage (and maximum hour) requirements do not apply to certain categories of employees. In other words, the exemptions remove certain categories of employees from the minimum wage requirements set forth in other parts of the Fair Labor Standards Act, but they do not remove persons in those categories from the definition of an employee. Thus, the definition or “meaning” of an employee under the Fair Labor Standards Act is the broad definition contained in 29 U.S.C. 203(e) – “any individual employed by an employer” – rather than any narrower classification that applies for the provision of particular federal protections, such as wage and hour rules.

This conclusion is bolstered by the statement in Section 34a that “[o]nly the exemptions set forth in this section shall apply to this section.” This provision refutes the owner-employers’ argument that the legislature was permitted to graft exemptions to minimum wage requirements set forth in 29 U.S.C. 213 of the Fair Labor Practices Act onto the definition of an employee contained in 29 U.S.C. 203.

The dissent did not believe it was beyond a reasonable doubt that the legislation conflicted with the constitution because the meaning of employee should include the FLSA exemptions.  Nothing in §34a limits consideration of the “meaning” of “employee” to a particular section of the FLSA.   Moreover, the exemptions contained in §34a are not similarly included in the FLSA.  “Logically, the drafters of Ohio’s constitutional amendment would have specifically mentioned the existing exemptions and exclusions in the FLSA if they believed that these categories were not already excluded from the meaning of “employees” for purposes of Section 34a. Exempting one specific category of employees from Ohio’s coverage, while failing to exempt other previously-excluded categories, makes no sense.”

Unless this decision is reversed, Ohio employers could lose the minimum wage exemption for all employees and will be subject to the recordkeeping and reporting procedures that now apply to non-exempt employees.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Minimum Wage Increases on Wednesday for Most Employees to $7.95/Hour

Don’t look now, but 2014 starts in two days on Wednesday.   That means that Ohio’s minimum wage for most employees will rise a dime to $7.95/hour.  As discussed in the press release issued by the Ohio Department of Commerce’s Industrial Compliance Division:

Ohio’s minimum wage is scheduled to increase on January 1, 2014 to $7.95 per hour for nontipped employees and to $3.98 per hour for tipped employees, plus tips. The increased minimum wage will apply to employees of businesses with annual gross receipts of more than $292,000 per year.

               . . .

For employees at smaller companies (with annual gross receipts of $288,000 or less per year in 2013 or $292,000 or less per year after January 1, 2014) and for 14- and 15-year-olds, the state minimum wage is $7.25 per hour. For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour which requires an act of Congress and the President’s signature to change.

There are additional exceptions to the minimum wage requirement, many of which are noted on the Division’s poster.  Employers are required to post in a conspicuous place the updated Division’s Minimum Wage Poster, which can be accessed for free and printed online.

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Happy New Year and New Minimum Wage

With the holidays officially over, it’s a new year and a new minimum wage for employees in Ohio.   As of yesterday, the minimum wage for Ohio employees rose to $7.85/hour.   According to §34a of Article II of the Ohio Constitution and Ohio Revised Code §4111.14, the FLSA governs who is considered to be an “employer” subject to Ohio’s minimum wage law (except that §34a also explicitly covers the state and all political subdivisions as well).   The official 2013 Ohio Minimum Wage poster – which should now be hung conspicuously in all Ohio workplaces (that are subject to the law under Ohio Revised Code §4111.09) -- indicates that employers which gross less than $288,000 are not subject to Ohio’s minimum wage and can pay only the $7.25 federal minimum wage.    Tipped employees (i.e., those who customarily receive more than $30/month in tips) are entitled to only $3.93/hour.  Individuals who are not covered – or who are exempted -- by the federal and state minimum wage laws get paid only what they negotiate by contract.

Determining who is covered and who is exempted by the minimum wage laws sometimes requires a law degree and great patience to dig through ad hoc amendments to statutes and regulations.  Ohio Revised Code §4111.14 summarizes §34a in more detail, but still incorporates by broad reference the coverage provisions of the FLSA.  Section 203 of the FLSA provides that an “employer” ” includes any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency, but does not include any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization“ and an “employee means any individual employed by an employer” with certain exceptions. (For instance, agricultural and domestic workers are generally exempt but the federal Department of Labor has been working to significantly curtail the domestic exemption and had been working to restrict the agricultural exemption as well).   Section 206, however, which generally governs the federal minimum wage requirements, provides that employers are only required to pay the minimum wage to employees who are “engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce.”  There are additional exceptions to this rule as well (as well as other ad hoc amendments that are beyond the scope of this posting).   

Unless an employer can prove that its enterprise – or a particular employee -- is exempt from the minimum wage laws, it is prudent to assume that the employer and/or the employee are covered.   In the last quarter of 2012, a Central Ohio employer found itself liable for $15,996.52 in unpaid minimum wages, $581.40 in unpaid overtime, and $33,155.84 in damages.  Goodman v. Cleland, 2012-Ohio-5044.  The court rejected the employer’s attempt on appeal to show that it was not subject to the overtime wage provisions.  Instead, the court treated the not-an-employer-under-the-statute argument as an affirmative defense – with the burden of proof on the employer.  (This case is a little confusing because the appellate court discusses at ¶ 23 the trial court’s refusal to consider the argument in a motion to dismiss because it was not specifically designated as an affirmative defense in the employer’s answer to the complaint even though the defendant denied being an employer under the statute.  Nonetheless, the appellate court then finds in the same paragraph that the employer waived the argument by failing to raise it again at the summary judgment stage). 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio’s Minimum Wage to Increase to $7.30 on January 1, 2009.

Because Ohio’s minimum wage is part of the Ohio Constitution (and cannot be easily amended) and contains a provision for automatic increases in the minimum wage tied to the annual Consumer Price Index as of September 30, the Ohio Department of Commerce has announced that the minimum wage will increase to $7.30 on January 1 based on the CPI as of Tuesday, September 30, 2008. The minimum wage for tipped employees will increase to $3.65/hour.

Insomniacs can read the full announcement (along with how it will affect youth wages) at http://www.com.ohio.gov/laws/docs/laws_2009MinimumWage.pdf.