It was a busy third month of 2019, so we will march right into discussing developments concerning the minimum wage, tips, and overtime.
A Busy Month for the U.S. Department of Labor: The U.S. Department of Labor (DOL) unveiled its long-awaited proposal to revise the Fair Labor Standards Act (FLSA) white collar employee exemption regulations.1 The proposed rule seeks to increase the minimum salary for the executive, administrative and professional employee exemptions from $455 per week ($23,660 annualized) to $679 per week ($35,308 annualized), and to increase from $100,000 to $147,414 the total amount of annual compensation individuals must receive to qualify for the highly compensated employee exemption.
The DOL also released a proposal to amend the FLSA regulations to clarify and update regular rate requirements concerning compensation and benefits employers must include in the overtime calculation.2
The Department also issued two new FLSA opinion letters.3 One opinion letter concerns whether time spent participating in an employer’s optional volunteer community service program is considered “hours worked” under the FLSA, particularly where the employer awards a bonus to certain employees who participate in the program. The other opinion letter addresses whether the FLSA guarantees minimum wage and overtime pay to residential janitors despite potentially applicable exemptions from similar state law requirements. The letter also addresses whether an employer that relies on state law exemptions has a “good-faith” defense to the imposition of liquidated damages or three years of back wages liability.
Maryland Legislators Issue Knock-Out Punch in Fight for $15: Overriding a veto by Governor Hogan (R), Maryland legislators enacted SB 280, which eventually increases the state minimum wage. The bill creates a temporary two-tier system, with one rate applicable to employers with 15 or more employees and a lower rate applicable to employers with 14 or fewer employees. On January 1, 2020, both rates will increase from $10.10 to $11.00 per hour. In subsequent years the 15 employee or greater rate will increase faster, with each increase occurring on January 1: $11.75 (2021); $12.50 (2022); $13.25 (2023); $14.00 (2024); $15.00 (2025). The 14 employee or fewer rate increases will also occur on January 1, except the final scheduled increase will occur on July 1: $11.60 (2021); $12.20 (2022); $12.80 (2023); $13.40 (2024); $14.00 (2025); $14.60 (Jan. 1, 2026); $15.00 (July 1, 2026).
For tipped employees, the minimum cash wage will remain $3.63 per hour, allowing employers to apply a tip credit equal to the difference between the minimum wage and minimum cash wage if employees’ direct wage plus tips equals at least the minimum wage. SB 280 also requires the state labor department to adopt regulations to require restaurant employees that claim a tip credit to provide tipped employees a written or electronic wage statement each pay period that shows their effective hourly tip rate. Technically, the amendments do not take effect until June 1, 2019, so currently it is unknown whether the department will wait until then to issue rules or instead begin working on a proposal that could be finalized by the time the amendments take effect.
Nevada Minimum Wage & Overtime Rates Will Not Increase on July 1: Nevada’s Labor Commissioner released its annual minimum wage and overtime bulletins. Effective July 1, 2019, the minimum wage rates will remain $7.25 per hour for employees offered health benefits and $8.25 per hour for all other employees, and the overtime rates will remain $10.875 and $12.375 per hour, respectively. Although the announcement was released in March, but is dated April 1, we do not think the Commissioner was playing an early April Fools’ Day joke, as the minimum wage and overtime rates have not changed since July 2010.
Washington State Labor Department Offers “Tips” via Administrative Guidance: The Washington State Department of Labor & Industries issued Administrative Policy ES.A.12 (Tips, Gratuities, and Services Charge). State law does not address tip pooling, so the guidance helps fill a gap by addressing employer-mandated and voluntary employee tip pools. The guidance also addresses, e.g., no-tipping policies, service charges, tips when managers or supervisors directly provide service, when to pay tips and service charges, and tips left via credit card.
Maine Tweaks Tip Pooling Requirements: Maine’s governor signed LD 81, which on September 17, 2019 will make slight linguistic changes to a statute governing tip pooling: This section may not be construed to prohibit an employer from establishing a valid tip-pooling arrangement only among service employees so long as it does not violate the federal Fair Labor Standards Act and regulations made pursuant to that Act.
Virginia Amends Minimum Wage Exceptions: Virginia enacted HB 2473 and SB 1079, so, effective July 1, 2019, an exception from payment of the state minimum wage will no longer apply to the following individuals paid the state minimum wage: newsboys, shoe shine boys, ushers, doormen, and theater concession attendants and cashiers. The amendments revise the babysitter exception to exclude any person who works as a babysitter for fewer than 10 hours per week. The amendments also tweak the summer camp employee exception. The exception applies to persons employed by a boys’ and/or girls’ summer camp; as amended, the exception will apply to persons employed by a summer camp for boys, girls, or both boys and girls.
Preemption in North Dakota, You Betcha: North Dakota enacted a law to prohibit political subdivisions from enacting, maintaining, or enforcing by charter, ordinance, purchase agreement, contract, regulation, rule, or resolution a living wage mandate that exceeds the state minimum wage. Before HB 1193, there were no local minimum wage ordinances.
Controversial Michigan Amendments Take Effect: On March 29, amendments to Michigan’s minimum wage law took effect. The minimum wage increased from $9.25 to $9.45 per hour. For tipped employees, the minimum cash wage increased from $3.59 to $3.67 per hour and the maximum tip credit increased from $5.86 to $5.98 per hour. Controversy surrounds the amendments because they occurred during a lame duck session and substantially overhauled prior amendments the legislature adopted as law instead of sending to the voters (because the item was a proposed ballot measure). Petitions have been filed with the state supreme court, asking for an advisory opinion on the legality of the amendments, and the court has accepted amicus briefing, which possibly signals it will hear the case.
Colorado Seeking Comments on Potential Wage Order Revisions: Colorado’s Division of Labor is seeking public comment on whether it should expand the number of industries covered by its Minimum Wage Order. It also seeks comment on whether a minimum salary should be required to be an exempt administrative, executive / supervisor, professional, or outside sales employee and, if so, what that minimum salary should be. The comment deadline is August 16, 2019.
Quick Legislative Update: In addition to above-referenced state-level developments, below we quickly recap the state of minimum wage-, tip-, and overtime-related legislative affairs around the country, focusing primarily on bills that have been sent to the governor, and bills that have passed out of one legislative house.
- Passed Both House (To Governor)
- Indiana SB 231 seeks to create a new minimum wage and overtime exception for direct sellers.
- New Mexico SB 437, if signed by the governor, will increase the state minimum wage on January 1 from $7.50 per hour to $9.00 (2020), $10.50 (2021), $11.50 (2022), and then $12.00 (2023). The bill also proposes to increase the minimum cash wage for tipped employees from $2.13 per hour to $2.35 (2020), $2.55 (2021), $2.80 (2022), and then $3.00 (2023).
- Passed One House
- Arizona HB 2523 would allow employers to pay employees under 22 years of age that are employed on a casual basis and enrolled full-time as a student the $7.25 per hour federal minimum wage (or more), which is less than the current $11.00 per hour state minimum wage.
- Colorado HB 1210 would repeal existing prohibitions against local minimum wage ordinances and create a new statute that provides local governments the authority to enact such laws.
- Hawaii SB 789 would eventually raise the minimum wage from $10.10 to $15.00 per hour in 2024, with a lower rate for employers required to provide health care coverage to an employee (if employee actually receives coverage). Hawaii HB 1191 proposes a minimum wage income tax credit of up to $50,000 per taxable year for small businesses, and increasing the state minimum wage to $12.00 per hour in 2020 and $15.00 per hour in 2023. Hawaii HB 96 seeks to provide counties the power to enact local minimum wage ordinances, and set local minimum wage rates that exceed the state rate.
- New Hampshire SB 10 proposes, beginning in 2022, a two-tier system based on whether an employee is provided at least 10 paid sick days; an employer could pay such employees $1.00 less per hour than the proposed $12.00 per hour wage rate. New Hampshire HB 186 would increase the state minimum wage, on January 1, from $7.25 per hour to $9.50 (2020), $10.75 (2021), and $12.00 (2022), and increase the minimum cash wage for tipped employees from 45% to 50% of the minimum wage.
- Washington HB 1706 seeks to prevent the state labor department from issuing certificates that allow payment of a sub-minimum wage for individuals whose earning capacity is impaired by disability, and to eliminate the state labor department’s authority to issue regulations allowing payment of subminimum wage to individuals whose earning capacity is impaired by age.
- Other Interesting Bills
- Oregon HB 3374 would require that, to qualify as an exempt executive, administrative, or professional employee, the individual earn a salary, and be paid on a salary basis, at least twice the state minimum wage or the federal minimum wage (whichever is greater) multiplied by 2,080 hours per year, then divided by 12.
- Texas HB 4616 proposes, for purposes of calculating the state minimum wage, prohibiting employers from using a method that either guarantees weekly pay for a variable number of hours or establishes a fixed salary for fluctuating hours in a workweek.
- Washington SB 5987 would require that independent contractors be paid the state minimum wage.
Gavel-to-Gavel Coverage: Two state supreme courts issued decisions concerning the minimum wage and/or overtime. In Massachusetts, the Supreme Judicial Court held that the state’s agricultural overtime exemption does not apply to workers who perform post-harvesting activities.4 In New York, the Court of Appeals held that home healthcare providers can pay homecare aides for 13 hours of a 24-hour shift if employees get eight hours for sleep breaks (five of which are uninterrupted) and three hours for meal breaks.5
Additionally, a state appellate court affirmed a trial court decision that held state law did not preempt the Minneapolis Minimum Wage Ordinance.
Local Matters: The City Council of Berkeley, California – in Northern California’s San Francisco Bay Area – adopted a recommendation that the City Manager and California Labor Commissioner apply the California Supreme Court’s ABC test from Dynamex Operations West v. Superior Court6 when determining whether an individual is an employee under the city’s minimum wage ordinance. Berkeley is at least the second Bay Area city to use the Dynamex test for determining whether an individual is an employee or independent contractor; the other is San Francisco.7
Also in the Bay Area, the Fremont City Council amended its minimum wage ordinance to broaden its non-profit employee exception. As amended, the law does not cover employees employed by non-profit corporations. Previously, the law did not cover employees up to age 21 employed by a non-profit for after-school or summer employment, or as a student intern, volunteer, or trainee for a period no longer than 120 days.
In Southern California, the San Fernando City Council voted to study the feasibility of adopting a minimum wage ordinance.