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.

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.

Unanimous D.C. Court of Appeals Strikes Down NLRB Poster Rule as Violating Employer Free Speech Rights

[Editor's Note:  As of January 3, 2014, the NLRB has abandoned the appeal of this and a similar Fourth Circuit Court decision to the Supreme Court.  Therefore, the NLRB's posting rule no longer applies to many private-sector employers.  Nonetheless, these court decisions do not affect the obligation of government contractor to post the same notice under Executive Order 13496 because that Order was not promulgated under the authority of the NLRA.]

Earlier today, the D.C. Court of Appeals issued its long-awaited decision in National Association of Manufacturers v. NLRB, No. 12-5068 (D.C. Cir. 5-7-13).  As faithful readers may recall, the NLRB promulgated a rule in August 2011 requiring virtually all private employers to post a large poster explaining employee rights under the NLRA.  NAM and other employer organizations filed a lawsuit to block the rule.  As previously reported here, the D.C. District Court upheld the rule, but struck down a few of its enforcement provisions.  Certain portions of the poster contained union-friendly descriptions of employee rights and rights that did not apply equally in all industries or circumstances.  The poster also failed to describe employee rights to object to union dues and to seek decertification.  Moreover, the rule tolled the limitations periods for, and ascribed anti-union motive to, employers that failed to post the poster and made them liable for an unfair labor practice.  “We therefore conclude that the Board’s rule violates § 8(c) because it makes an employer’s failure to post the Board’s notice an unfair labor practice, and because it treats such a failure as evidence of anti-union animus in cases involving, for example, unlawfully motivated firings or refusals to hire—in other words, because it treats such a failure as evidence of an unfair labor practice.” 

The Court first considered whether the NLRB had quorum to issue the rule (in light of its recent Noel Canning decision rejecting certain recess appointments).  The Court concluded that there were three properly confirmed members of the NLRB – which is  a quorum – when the rule was voted upon and approved even though the term of one of those members expired before the rule was published in the Federal Register.

The Court also concluded that the most important issue in the case concerned employers' free speech rights under §8(c) of the NLRA, instead of the §6 rights that had dominated prior arguments.  Under §8(c),  

[t]he expressing of any views, argument, or opinion, or the dissemination thereof, whether in written, printed, graphic, or visual form, shall not constitute or be evidence of an unfair labor practice under any of the provisions of this [Act], if such expression contains no threat of reprisal or force or promise of benefit.

Despite this statutory protection for free speech in labor-management disputes, the Court found that the poster rule violated both its letter and spirit: 

Although § 8(c) precludes the Board from finding noncoercive employer speech to be an unfair labor practice, or evidence of an unfair labor practice, the Board’s rule does both. Under the rule an employer’s failure to post the required notice constitutes an unfair labor practice. See 29 C.F.R. §§ 104.210, 104.212.10 And the Board may consider an employer’s “knowing and willful” noncompliance to be “evidence of antiunion animus in cases in which unlawful motive [is] an element of an unfair labor practice.” 76 Fed. Reg. at 54,035–36; see also 29 C.F.R. § 104.214(b).11.  The Board, in other words, will use an employer’s failure to post the notice as evidence of another unfair labor practice.

The Court rejected the Board’s argument that the poster reflected the NLRB’s speech and was not imputing speech to an employer.  Analogizing to First Amendment cases which protect a citizen’s right to “disseminate” pamphlets published by someone else, the Court observed that:

The right to disseminate another’s speech necessarily includes the right to decide not to disseminate it. First Amendment law acknowledges this apparent truth: “all speech inherently involves choices of what to say and what to leave unsaid.”

  . . .

“Some of [the] Court’s leading First Amendment precedents have established the principle that freedom of speech prohibits the government from telling people what they must say.”

For example, the Supreme Court had previously held the First Amendment prevented a state from requiring drivers to use a license plate that said “live free or die” and from making school children state the pledge of allegiance.  The Court also rejected the Board’s argument that an employer remained free to post its non-coercive position about unionization next to the poster.  The Court also rejected the Board’s reliance on prior precedent concerning the Bush Administration’s rule requiring federal contractors to post a notice about employee Beck rights because that rule did not apply to all employers and did not involve §8(c) in that the rule was promulgated by the government as a purchaser instead of by the NLRB.   Moreover, in those cases, the unions only argued that the Beck notice rule was pre-empted by the NLRA and did not argue that it violated the NLRA.

The Court likewise rejected the portion of the Board poster rule that tolled the NLRA’s six-month limitations period. According to the Court, few, if any courts, treat a victim’s ignorance of the law as a basis for equitable tolling and the Board erred in concluded that this theory could justify its action in violating the terms of §10(b).

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.