New York Labor and Employment Law Report : New York Employment Lawyer & Attorney : Bond Schoeneck & King Law Firm : NY Labor Relations, Employee Benefits

Recently, the U.S. Department of Labor's Wage and Hour Division released three new Fact Sheets on unlawful retaliation under the Fair Labor Standards Act ("FLSA"), the Family and Medical Leave Act ("FMLA"), and the Migrant and Seasonal Agricultural Worker Protection Act ("MSPA").  Although the Fact Sheets do not contain any new information on the prohibition against retaliation, they provide a good reminder to employers regarding the scope of the anti-retaliation provisions in these three statutes.

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A bill has been introduced in the New York State Legislature that would, if enacted, repeal the annual wage notice requirement imposed by the Wage Theft Prevention Act ("WTPA").  The bill would leave intact the requirement that employers provide a wage notice to all new hires, as well as the requirement that employers obtain signed written acknowledgments of the new hire wage notices.  At this point, the bill is in its infant stages, and no vote has been taken.

The Business Council of New York State has submitted a memorandum in support of the bill, and has created a web page for employers to join in the effort to convince the New York State Legislature to repeal the annual wage notice requirement.

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As New York employers should be aware, the first annual notice to employees required by the Wage Theft Prevention Act ("WTPA") must be distributed by February 1, 2012.  Although the requirements of the WTPA have been grabbing recent headlines, this post addresses one unavoidable by-product of the annual notice requirement -- the reality that the distribution of these annual notices is likely to lead to workplace discussions among co-workers regarding wage and salary information.  As a reminder, blanket rules -- whether formal or informal -- prohibiting employees from discussing their pay and benefits with their co-workers are unlawful under the National Labor Relations Act ("NLRA").

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At one point in the Hitchhiker’s Guide to the Galaxy series by British author Douglas Adams, Arthur Dent finds himself confronted by a door that will not open unless he can demonstrate a high degree of intelligence. When Dent somehow manages to possess both tea and no tea at the same time, the door opens, noting that Dent must be quite a philosopher to overcome the inherent contradiction of holding and not holding an item at once.

A recent decision by the Second Circuit is reminiscent of Dent’s feat. In Shahriar v. Smith & Wollensky, the Second Circuit Court of Appeals was confronted with the question of whether plaintiffs could simultaneously maintain a collective action under the Fair Labor Standards Act, as well as a class action based on state-law claims under Rule 23 of the Federal Rules of Civil Procedure. If you are wondering why that poses an issue, in a collective action potential plaintiff class members are not in unless they affirmatively opt in, whereas the plaintiffs in Rule 23 class actions are in unless they affirmatively opt out. As a result, the same person could be both a plaintiff and not a plaintiff in the same action; out of the collective action because she did not opt in, but in the class action because she did not opt out.
 

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Late last year, we posted on the passage of New York’s Wage Theft Prevention Act (WTPA), noting that the Act changed the penalties for violating the New York Labor Law’s prohibition on failure to pay wages. Specifically, the Act increased the liquidated damages penalty for failure to pay wages from 25% of the wages found to be due, to 100% of the wages found to be due. In addition, the WTPA requires an award of those liquidated damages, unless the employer proves it had a good faith basis to believe the underpayment of wages complied with the law, making an award of liquidated damages more likely.

Now, a New York trial court has determined that this liquidated damages provision applies retroactively to claims arising before the Act’s April 9, 2011 effective date. The case involves, among other claims, an alleged failure to pay overtime. The plaintiffs moved to amend their complaint to add the remedies created by the WTPA. In its decision granting the motion, the Court noted that under New York law a remedial statute is applied retroactively unless it impairs vested rights or creates new rights. The parties agreed the WTPA is a remedial statute, and the court concluded that it does not impair vested rights or create new rights. It just changes the penalty imposed with respect to a violation of rights already existing in the Labor Law. As a result of the decision, claims for failure to pay wages which go back several years (the statute of limitations on unpaid wage claims is six years) will be subject to the heightened WTPA penalties.
 

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The issue of whether to compensate an employee for commuting time can be a difficult one where the employee does not have a single standard work location to which he reports. When the employee’s home base is his home, and he performs work at home each day before he gets on the road, is he entitled to be compensated for all time spent commuting between his home and various work sites? The United States Court of Appeals for the Second Circuit recently held no – at least not when the employee is not required to perform the home tasks immediately preceding or following required travel to other work sites.

The case was brought by a former employee of Black & Decker whose responsibilities included merchandising and marketing Black & Decker products at six Home Depot stores which were located between 20 minutes and three hours from his home by car. Black & Decker’s travel policy, adopted pursuant to a USDOL opinion letter, only paid for travel time going to a first store of the day or returning home from the last store of the day in excess of 60 miles (converted in practice to travel in excess of 60 minutes). So travel of 1.5 hours at the end of the day would only be compensated with half an hour of pay.
 

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The Wage & Hour Defense Institute (WHDI) of the Litigation Counsel of America is an invitation only group comprised of highly talented and experienced wage and hour defense attorneys from across the United States. To further its goal of being a resource for employers, the WHDI annually updates its State-By-State Wage and Hour Law Summary. The Summary is an excellent reference tool for employers with employees in multiple states. The Summary  addresses multiple topics on a state-by-state basis, including whether each state: (1) follows the federal exemptions; (2) uses special overtime rules; (3) has a higher minimum wage rate; (4) accepts the fluctuating work week method for calculating overtime; and (5) has meal and/or rest period rules. A copy of the Summary is available here.

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The New York State Department of Labor (“NYSDOL”) recently published additional guidance on compliance with the Wage Theft Prevention Act (“WTPA”). This guidance supplements the NYSDOL’s previously-issued templates, instructions and FAQs on the WTPA. Specifically, the NYSDOL recently published a “sample” paystub, demonstrating how employers should comply with the WTPA’s amendments to New York Labor Law Section 195(3). As we reported previously the amended Section 195(3), requires employers to include the following information in all employee paystubs:

• Dates of work covered by wage payment;
• Name of employee;
• Name of employer;
• Employer’s address and phone;
• Rate or rates of pay;
• Basis of rate(s) of pay (hourly, shift, day, week, salary, piece, commission or other);
• Gross wages;
• Deductions;
• Allowances, if any are claimed as part of the minimum wage (tips, meals, lodging); and
• Net wages. 

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Over the last couple of years the New York State Department of Labor has issued several opinion letters which significantly narrow its interpretation of New York Labor Law Section 193, the law governing permissible deductions from wages. We have discussed some of these interpretations in prior posts. To summarize, NYSDOL  takes the position that a deduction from wages is not permissible unless it is a deduction which is similar to those expressly recognized in the statute as lawful, e.g. payments for insurance premiums, pension or health and welfare benefits. This interpretation varies from the Department’s historical focus on whether the deduction was for the “benefit of the employee.” Based on the newer standard, NYSDOL has rejected suggestions that an employer may make deductions from wages for items such as an overpayment of wages, parking, or for wage-linked card purchases of food at an employer-subsidized cafeteria.

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On Monday, the United States Department of Labor (DOL) released a smartphone App that is essentially a timesheet to help employees independently track the hours they work and determine the wages they are owed. The App is available here.

With this App (available in English and Spanish), employees can track regular work hours, break time and any overtime hours. As promoted by the DOL - "This new technology is significant because, instead of relying on their employers’ records, workers now can keep their own records. This information could prove invaluable during a Wage and Hour Division investigation when an employer has failed to maintain accurate employment records."
 

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Recently, the United States Department of Labor’s Wage and Hour Division (“DOL”) published final revisions to its Fair Labor Standards Act (“FLSA”) regulations. The long-awaited amendments, which became effective on May 5, 2011, are based on a proposed rule originally published in the Federal Register on July 28, 2008. For the most part, the final rule does not impose new requirements on employers, but instead clarifies existing rules and changes outdated information.

Some of the more noteworthy amendments relate to “tipped” employees. Specifically, the final rule clarifies that: (1) tips are the property of the employee, whether or not the employer has taken a tip-credit; (2) the employer is prohibited from using an employee’s tips for any reason other than a tip-credit or a valid tip pool; and (3) prior to utilizing the tip-credit, the employer must inform its tipped employees of the tip-credit requirements contained in section 3(m) of the FLSA. The final rule also clarifies that a valid tip pooling arrangement may only include those employees who customarily and regularly receive tips, even if the employer takes no tip-credit and instead pays the tipped employee the full minimum wage. The amendments further state that while the FLSA does not impose a maximum contribution percentage on mandatory tip pools, an employer must notify its employees of any required tip pool contribution amount and may only take the tip-credit for the amount of tips each employee ultimately receives.
 

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Eight days before the Wage Theft Prevention Act goes into effect, the New York State Department of Labor finally released the notification templates and related information which will assist New York employers in complying with the Act. The documents were posted on the Department’s website Friday.

The Department issued notification templates for the following groups of employees: (a) Hourly Rate Employees; (b) Multiple Hourly Rate Employees; (c) Employees Paid a Weekly Rate or a Salary for a Fixed Number of Hours (40 or Fewer in a Week); (d) Employees Paid a Salary for Varying Hours, Day Rate, Piece Rate, Flat Rate, or Other Non-Hourly Basis; (e) Prevailing Rate and Other Jobs; and (f) Exempt Employees. The templates are available here.

The Department also issued Guidelines for Written Notice of Rates of Pay and Regular Payday, as well as instructions related to the templates. While the Guidelines state that dual language templates are available in Chinese, Haitian-Creole, Korean, Polish, Russian, and Spanish, as of this writing, only the Chinese, Korean and Spanish templates are available.

Finally, the Department also issued a document titled, “Frequently Asked Questions About the Wage Theft Prevention Act,” which provides answers to many of the most common questions employers have about the Act.
 

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As challenging as 2010 was, 2011 promises to be even more challenging for employers trying to remain in compliance in an ever-changing legal and regulatory environment. While coming into full compliance may seem daunting, addressing the ten concerns discussed below will be a meaningful step in that direction.

1.  Meal Periods. New York State requires employers to provide employees who work shifts in excess of six hours a meal period of not less than 30 minutes. Penalties for noncompliance start at $1,000 per offense and increase with each offense. In addition, if an employer automatically deducts meal periods from working time and such deductions do not accurately reflect the meal periods taken, the employer may not be paying employees for all time worked – resulting in far greater legal exposure.

What To Do: Employers should develop and enforce a meal period policy, requiring employees to take their meal periods (which cannot be waived). Employers should also require employees to leave their work area and prohibit employees from performing any work during meal periods. If employees’ meal periods are frequently interrupted, they should be paid for the entire meal period. Employers should also maintain accurate records demonstrating that they are complying with meal period obligations. Employers who automatically deduct for meal periods should have a policy notifying employees of this practice, a mechanism for employees to report when they have worked during a meal period, and should require employees and their supervisors to certify the accuracy of time records. Employers should also train supervisors on the legal obligations associated with meal periods.
 

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We have posted previously on the amendments to New York Labor Law Section 195, the so-called Wage Theft Prevention Act, which creates certain employer obligations to notify employees of their wage rates and other information. As the April 9, effective date approaches, employers should be preparing to provide the following notifications and information.

Notification at Time of Hire

Whenever a new employee is hired, Section 195 now requires employers to provide the following information to each new hire before the new hire begins work:

• Rate or rates of pay
• Basis of pay (e.g. hourly, shift, day, week, salary, piece, commission, or other)
• Allowances, if any, claimed against the minimum wage (e.g., tips, meals, lodging)
• Identification of the regular pay day.
• Name of employer (including any doing business as name)
• Address and phone of employer
   

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On December 15, 2010, we reported that former New York Governor David Patterson signed the Wage Theft Prevention Act (the “Act”) into law on December 13, 2010. Because the Act states that it shall take effect 120 days after it is signed into law, we reported the effective date as Tuesday, April 12, 2011. However, it appears that Governor Patterson signed the Act twice – first on December 10, 2010 and then again during a public ceremony on December 13. Because the Act was first signed into law on December 10, 2010, the effective date is actually Saturday, April 9, 2011. As a result, employers must implement the Act’s new notice, employee acknowledgment and record retention requirements by April 9, 2011. Because implementation may require significant changes in current policies and procedures, employers should begin a review of payroll and wage notification practices now.

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The New York State Department of Labor’s Hospitality Industry Wage Order, which is intended to combine and replace the Wage Orders formerly applicable to the Restaurant Industry and Hotel Industry, became effective on January 1, 2011. The Department of Labor has issued a notice to employers that it will exercise discretion with regard to enforcement until February 28, 2011, in order to allow employers sufficient time to come into compliance, but expects that employees covered by the Wage Order will be paid any additional wages owed to them by March 1, 2011 or the next regularly scheduled pay day after March 1, 2011. The additional wages must be computed retroactively to January 1, 2011. Employers covered by the Wage Order are required to post a notice to employees regarding the implementation period and their right to retroactive payment of wages.

The Wage Order makes several changes to the rules governing the payment of wages to employees in restaurants and hotels. Some of the significant changes are described below.
 

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On Monday, December 13, 2010, Governor Patterson signed the Wage Theft Prevention Act, which broadens greatly the Department of Labor’s enforcement powers, imposes new and expanded notification requirements on employers, and increases significantly employers’ potential liability for violations of the Labor Law. A summary of the major changes, which take effect on April 12, 2011, is provided below.

Notice Requirements

The Act makes significant changes to section 195 of the Labor Law by requiring employers to provide even more information to employees, both upon hire and on or before February 1 of each following year. Required information now includes, among other things: pay rates, basis of pay rate, how the employee will be paid (e.g., hour, shift, week, salary, etc.), any allowances claimed as part of the minimum wage, the regular pay day, and “such other information as the commissioner deems material and necessary.” Employers must provide this documentation in both English and in the employee’s primary language and maintain accurate records for six years. The Commissioner of Labor will establish dual-language templates for purposes of complying with these changes.

Failure to provide notice as required by section 195 within ten business days of the employee’s first day of employment allows either the Commissioner or the employee to bring an action to recover damages of $50 for each work week that the violation occurred, plus costs and reasonable attorney’s fees. Damages recoverable for prevailing employees are capped at $2,500. No such maximum applies for actions brought by the Commissioner.
 

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Last month we posted on several bills signed into law by Governor Paterson in late August, one of those is the Construction Industry Fair Play Act, which applies to construction industry contractors in New York and is designed to deal with the problem of worker misclassification in that industry. Among other things, the Act creates a presumption that workers in the industry are employees, not independent contractors, unless three statutory criteria are met. The Act, which went into effect Tuesday, also provides for fines and criminal penalties for willful misclassification of employees. The New York State Department of Labor has issued a fact sheet explaining the statute. The Agency has also issued a poster which construction industry employers must display in a “prominent and accessible place on the job site.”

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Almost seven years ago, in Zheng v. Liberty Apparel Co., the Second Circuit Court of Appeals created a six factor test for assessing when businesses are liable as "joint employers" under the Fair Labor Standards Act (FLSA) for violations committed by their subcontractors. The Second Circuit held that, depending on the case, the following factors should be reviewed in determining joint employer status: (1) whether the workers work exclusively or predominantly for the purported joint employer; (2) the permanence or duration of the working relationship; (3) whether the purported employer’s premises and equipment are used by the workers; (4) the extent of control the putative joint employer exercises over the workers; (5) whether the outsourced workers can be considered an integral part of the business; and (6) whether the workers have a business organization that could shift as a unit from one putative joint employer to another. The Court also found that industry custom and historical practice could be considered to differentiate between legitimate subcontracting relationships and subterfuges intended to evade the FLSA.

The Second Circuit sent the case back to the District Court and, eventually, the case went to trial before a jury. At trial, the primary issue was whether the Liberty Defendants were plaintiffs' "joint employer" for purposes of the FLSA and analogous state law claims. The jury returned a verdict in favor of plaintiffs, and, following resolution of various post-trial motions, the District Court entered judgment accordingly. Liberty appealed that judgment, contending that the District Court, rather than the jury, should have determined whether it was the plaintiffs' joint employer. Recently, the Second Circuit affirmed, holding that the trial judge did not err in allowing a jury to decide the mixed question of law and fact as to whether Liberty was the plaintiffs' joint employer. Although Liberty argued that the lower court should have used a special verdict form allowing the judge to apply the six-factor test to the jury's factual findings, the Second Circuit said “such a rule would distort the jury's proper role” of applying law to fact.

The Second Circuit’s recent decision serves as a healthy reminder to employers who subcontract or outsource a portion of their business that they should carefully review such relationships to minimize the risk of potential FLSA liability.

A version of this post appeared previously on the Wage and Hour Defense Institute blog.
 

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The end of August was a busy time for Governor Paterson who acted on 90 pieces of pending legislation. Several of those laws will have an impact on employers across the State. Below is a brief summary of the new laws.

Domestic Workers Bill of Rights

By signing the “Domestic Workers Bill of Rights” Governor Paterson made New York the first state to have such a law. When he signed the legislation, Governor Paterson remarked that: “Today we correct an historic injustice by granting those who care for the elderly, raise our children and clean our homes the same essential rights to which all workers should be entitled.” The law, which takes effect November 29, 2010, defines a protected domestic worker as a “person employed in a home or residence for the purpose of caring for a child, serving as a companion for a sick, convalescing or elderly person, housekeeping, or for any other domestic service purpose.” Excluded from the definition are persons who: work on a casual basis; provide companionship services and are employed by someone other than the family or household for which the services are provided; and relatives by blood, marriage or adoption of the employer or of the person for whom the worker is providing services under a program funded by a federal, state or local government. Among other things, the law provides the following protections and benefits for covered domestic workers:

1)  the right to overtime pay at time and a half after 40 hours of work in a week, or 44 hours for workers who reside in the employer’s home;

2)  one day of rest every seven days, or overtime pay if it is waived;

3)  three paid days of rest annually after one year of work;

4)  the removal of the domestic workers exemption from the Human Rights Law, and the creation of a special cause of action for domestic workers who suffer sexual or racial harassment; and

5)  the extension of statutory disability benefits to domestic workers, to the same degree as other workers.
 

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The New York State Department of Labor recently added to its website opinion letters written by its Counsel’s Office. The Counsel's Office provides legal advice and counsel to the Commissioner of Labor and to programs within the Department. The opinion letters are primarily responses to requests for advice submitted by employers. All the letters are text-searchable.  They cover three general topics: wage and hour law, public works projects and the State Worker Adjustment and Retraining Notification Act (“WARN”). The wage and hour law letters span a wide variety of topics from blood donation leave and accommodations for nursing mothers to employment classifications, independent contractor issues, meal and rest periods, overtime, and wage deductions under Labor Law Section 193. The public works projects letters deal with state requirements for payment of the prevailing wage (the local union wage) by private employers performing work on public works projects. Most of those letters address whether the prevailing wage law applies to particular types of work. There are only a few opinion letters related to WARN, which is not surprising because the statute and its implementing regulations are still relatively new. Interestingly, none of the letters made publicly available predate 2007, the first year of a newly elected Democratic administration.

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Yesterday, the US Department of Labor issued a fact sheet  that provides general information on the break time requirement for nursing mothers, part of the Patient Protection and Affordable Care Act which took effect March 23, 2010. While these amendments to the Fair Labor Standards Act (FLSA) represent a significant change for employers in many states, since 2007, New York employers have been required to provide reasonable unpaid break time, or permit employees to use paid break time or meal time, to express breast milk. See our earlier posts on New York's requirement.

Thus, for New York employers, the most important observation contained in the US DOL's fact sheet is that the FLSA requirement of break time for nursing mothers to express breast milk does not preempt State laws that provide greater protections to employees. New York's protection of nursing mothers provides employees with a number of protections that exceed those provided under the new federal law. For example, New York law protects expression of breast milk up to three years following the birth of the child (federal law is limited to one year) and applies to all employers (federal law does not apply to employers with fewer than 50 employees).

Given that New York's protection of nursing mothers provides greater protection than the recent FLSA amendments, employers complying with existing New York law will be in compliance with the new federal law as well.

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On July 6, 2010, the Second Circuit Court of Appeals held that pharmaceutical sales representatives employed by Novartis Pharmaceuticals Corp. (“Novartis”) are not exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”) as either “outside sales” or “administrative” employees. In so doing, the Court determined that the Secretary of Labor’s interpretations of the regulations promulgated under the FLSA defining “outside sales” and “administrative” employees, as set forth in the Secretary’s amicus brief , were entitled to “controlling” deference.

The Second Circuit rejected Novartis’ argument that its sales reps “made sales” within the meaning of the “outside sales” regulations because the reps only promoted a drug to a physician. They could not lawfully take an order for its purchase or obtain a binding commitment from the physician to prescribe the drug to a patient. While the sales reps provided physicians with free samples, Novartis sold its drugs to wholesalers, which then sold them to pharmacies, and the pharmacies ultimately sold the drugs to the patients who had prescriptions for them. Accordingly, since the sales reps did not “make sales,” they were not “outside salespeople” within the meaning of the FLSA and the regulations.
 

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As summer nears, employers may be asked by college students about unpaid internship opportunities. Unpaid internships frequently benefit both the employer and the student. The student gains real-life experience, resume enhancement, networking opportunities, and perhaps a step toward a paid position after graduation. The employer has a low cost opportunity to evaluate a potential applicant. But employers must exercise caution in the way the internship program is set up and in the functions the intern performs.

The U.S. Department of Labor (“DOL”) recently issued a new Fact Sheet reminding employers that unpaid interns may be “employees” under the Fair Labor Standards Act (“FLSA”), the federal minimum wage and overtime law. For employers considering unpaid internships, the key question is whether the unpaid intern is “suffered or permitted” to work within the meaning of the FLSA. DOL stresses that in the “for-profit” sector, internships will most often be viewed as employment. However, there is a narrow exception for training programs. DOL has identified six criteria which must exist to satisfy the exception:
 

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Section 193 of the New York Labor Law prohibits employers from making deductions from an employee’s wages, except for certain deductions made for the benefit of the employee which are authorized by the employee in writing in advance, such as deductions for employee contributions to employee benefit plans. It also prohibits separate transactions between the employee and employer which would amount to the same thing as a prohibited deduction. In a surprising and disappointing change of direction, the New York State Department of Labor (“NYSDOL”) now takes the position that deductions from an employee’s wages for money owed to the employer (e.g., a loan, or overpayment of wages) are prohibited by Section 193 even with the employee’s written consent, because they are not similar to the types of permissible deductions enumerated in Section 193.

In addition, while it is permissible for an employer to ask an employee to pay the money back, if the employer threatens the employee with discipline for failure to pay back the money, NYSDOL will consider that conduct to be a prohibited separate transaction under Section 193. In fact, NYSDOL states that in making such a request the employer must clearly communicate that the employee’s refusal will not result in discipline or retaliatory action. NYSDOL believes that a legal proceeding to collect the money is the employer’s only legal recourse if the employee voluntarily fails to repay.
 

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Employers often assume that because an employee performs “professional” work she must be an exempt professional under the Fair Labor Standards Act (“FLSA”). Late last year, the United States Court of Appeals for the Second Circuit issued a decision which serves as a valuable warning to employers who make that assumption, Young v. Cooper Cameron Corp. For those of you who may not know or recall what the professional exemption is all about, here is a quick primer. The FLSA’s overtime provisions do not apply to exempt professionals. An exempt professional is one who, among other things, is “employed in a bona fide professional capacity.” The FLSA does not define that term any further. But the U.S. Department of Labor (“DOL”) has issued extensive regulations on the subject. In the Young case, the Second Circuit’s interpretation and application of these regulations revealed a common employer mistake: Just because the position seems like a “professional” position does not mean it falls within the professional exemption. In this case, the plaintiff was performing a type of engineering design work on a pretty sophisticated piece of equipment used on oil drilling rigs. While he had 20 years of engineering-type experience, he had only a high school degree. Nevertheless, based on the amount of his engineering experience and the type of work he was performing, the employer classified him as exempt.

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The New York State Department of Labor (“NYSDOL”) recently posted guidelines and instructions on its website addressing employer obligations under New York Labor Law § 195(1). This recently amended statute requires employers to notify newly-hired employees in writing of their pay rates, pay dates, and, if applicable, overtime rates. The statute also requires employers to obtain written acknowledgments from new employees confirming receipt of this information.

NYSDOL also posted several new “model” forms for employers to use when complying with Section 195(1). The new forms supplement the problematic, one-size-fits-all form published by the agency last year. These new forms are intended to cover several different employee groups, including non-exempt employees who are paid either: (a) an hourly rate; (b) multiple hourly rates; (c) a weekly rate or salary for a fixed number of hours (40 or fewer in a week); (d) a salary for varying hours, day rate, piece rate, flat rate, or other non-hourly pay; or (e) a prevailing rate on a public work project. There is also a new model form for exempt employees.  

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In recessionary times like these, employers often rely more heavily on independent contractors to avoid the personnel costs associated with hiring regular employees. Doing so, however, creates risks. Now is a good time to make the effort to determine whether your independent contractors are really independent contractors. Just don’t expect the answer to come easily.

The issue of who is properly classified as an independent contractor (as opposed to employee) has been giving employers headaches for decades. As the United States Supreme Court noted over 60 years ago: “Few problems in the law have given greater variety of application and conflict in results than the cases arising in the borderland between what is clearly an employer-employee relationship and what is clearly one of independent entrepreneurial dealing.” N.L.R.B. v. Hearst Publication, 322 U.S. 111, 121 (1944). It is little wonder that even the Supreme Court is troubled by this legal issue given the difficulties involved in the analysis. For starters, courts and government agencies (both state and federal) use different legal tests to make this determination. As a result, a single set of facts can produce different legal conclusions. Moreover, none of the tests utilized relies on definitive factors. As the Internal Revenue Service (“IRS”) states on its website, “[T]here is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.”

Although the issue is old, it has continued vitality. There has been a significant increase in litigation, government enforcement and legislation over the misclassification of independent contractors in recent years. It is equally clear that the focus on independent contractor misclassification, far from slowing down, will only continue to pick up steam. The remainder of this blog summarizes some recent developments demonstrating that employers need to be very careful when using independent contractors.
 

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Without acknowledging that it is doing so, today the New York State Department of Labor ("DOL") changed its position on whether employers are required to use DOL’s form in order to comply with Section 195 of the Labor Law. Effective October 26, 2009, Section 195 requires employers to provide all new hires with notice of their wage rates, pay dates, and, if applicable, overtime rates. The statute also requires that employers obtain written acknowledgments from new employees confirming receipt of this information, which must conform to any "content and form" requirements established by DOL. Shortly after the effective date of the statute, DOL issued a problematic, highly controversial, one-size-fits-all form for providing that information, and mandated its use by employers for all classes of employees. Today, DOL reversed position by posting a notice on its website that states no particular form is required to comply with the statute and that DOL’s form is only a sample.   Employers may create their own forms, use the DOL sample, or adapt the DOL sample form.  The notice also states that DOL plans to come up with several different types of sample forms in the future, including a form for exempt employees.

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Our August 11, 2009, posting explained New York’s new law requiring employers to formally notify new hires of their rate of pay, overtime rate (when applicable), and regular pay date, and to obtain a written acknowledgment from the employee that such information was provided. The law applies to employees hired on or after October 26, 2009. As we noted in the August 11, posting, the amendment to Section 195 of the Labor Law provides that the acknowledgement must conform to any requirements set by the Commissioner of Labor. The Commissioner has now provided those requirements by way of an informational fact sheet for employers and employees, and through a standard acknowledgement form. According to the fact sheet, use of the new form is mandatory. The form requires the individual providing the information to certify that it is accurate, and warns that a knowingly false statement is punishable as a misdemeanor.

Employers should begin using the new form immediately. While the new form will no doubt be adequate for most new hires, it may be difficult to use for new employees who have more than one position and pay rate, who receive incentive compensation in addition to their hourly rate, or whose pay rate can vary (for example based on shift differential). In particular, it may be difficult to use the new form accurately for new employees who work under collective bargaining agreements, which can contain a variety of different pay rates and overtime rates. Employers who have questions about accurately conveying information when using the new form should consult with counsel.
 

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Since the Supreme Court’s decision in IBP, Inc. v. Alvarez , 546 U.S. 21 (2005), “donning and doffing” claims have been filed with increased frequency against employers in many industries. In some instances, these claims take the form of a collective and or class action. Recently, the United States District Court for the Western District of New York granted summary judgment dismissing wage and hour claims brought under the Fair Labor Standards Act (“FLSA”) and the New York Labor Law in a case defended by Bond, Schoeneck & King, PLLC (“BS&K”). Albrecht v. The Wackenhut Corp., slip op. no. 07-CV-6162 (W.D.N.Y. Sept. 24, 2009). The court’s holdings are discussed below.

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Effective July 24, 2009, the minimum salary that an employee must receive to qualify for the executive or administrative exemption from overtime pay requirements in New York increased to $543.75. It was $536.10. Because this amount differs from the exempt salary amount under the federal Fair Labor Standards Act (“FLSA”) of $455, employers in New York should evaluate their pay practices to ensure compliance with both state and federal law. The differences between federal and New York law are described below.

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On August 26, 2009, Governor Paterson signed yet another  bill amending sections of the New York Labor Law.  This time, the amendments are designed to provide a greater deterrent effect to employers who violate the law.  The two amendments are described below.

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Despite our State Legislature’s distractions this summer, it continues to crank out laws which further regulate New York employers. Here are some recent changes about which employers should be aware.

On July 28, 2009, New York State Labor Law 195(1) was amended to require employers to provide all new employees hired on or after October 26, 2009 with written notice of their rates of pay and the employer’s regular pay days. See our August 11, 2009 blog post for details.

Some other notifications required by New York Law include:

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Effective October 26, 2009, employers in New York will have to provide employees hired after that date with a written notice of their rate of pay, their overtime rate (for non-exempt employees) and their regular pay date, pursuant to an amendment to Section 195 of the New York Labor Law.  The new law, signed by Governor Patterson on July 28, 2009, also requires employers to obtain a written acknowledgement from each newly-hired employee that he or she has received the required information.  The acknowledgement must conform to standards set by the Commissioner of Labor.  At this point, the Commissioner has not yet set those standards.

Prior to the amendment, employers only had to provide notice of the regular wage rate and pay date, but not in writing, and no written acknowledgement from the employee was required.  The purpose of the new law is to enable employees to determine their overtime rate and to ensure that employees understand their regular wage rates and pay dates. 

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The New York State Department of Labor ("NYSDOL") recently issued regulations regarding Labor Law Section 167, which prohibits health care employers from requiring nurses to work more than their regularly scheduled work hours.  The regulations reiterate and explain the provisions of the law, but also impose a requirement (which is not contained in the law) that health care employers establish a written "Nurse Coverage Plan" within 90 days of the regulations' July 15, 2009 effective date.  The NYSDOL has also posted on its web site answers to some frequently asked questions regarding the law and regulations.

The law, which went into effect on July 1, 2009, provides that health care employers may not require registered professional nurses and licensed practical nurses who provide direct patient care to work more than their "regularly scheduled work hours," subject to the following exceptions:

• a health care disaster, such as a natural or other type of disaster that increases the need for health care personnel, unexpectedly affecting the county in which the nurse is employed or a contiguous county;
• a federal, state, or county declaration of emergency in effect in the county in which the nurse is employed or in a contiguous county;
• a health care employer's determination that there is a patient care emergency (an unforeseen event that could not be prudently planned for and does not regularly occur) that makes work beyond regularly scheduled hours necessary; or
• an ongoing medical or surgical procedure in which the nurse is actively engaged and whose continued presence through the completion of the procedure is needed to ensure the health and safety of the patient.

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Effective July 24, 2009, the New York State minimum wage will increase from $7.15/hour to $7.25/hr. This increase will bring the state minimum wage in line with the federal minimum wage which will increase from $6.55/hour to $7.25/hour, also effective July 24, 2009. Employers should note this change, take the necessary steps to implement this increase and replace all prior state minimum wage postings with the recently-promulgated New York State Department of Labor Minimum Wage Notice.

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It is that time of year when employers are approached with requests from college students for unpaid internships. The benefits of the symbiotic relationship are obvious. The internship provides the student with an opportunity for real life experience, resume enhancement and perhaps a step towards a paying position with the employer after graduation. The employer receives the chance to evaluate a new applicant, at no cost. What is not so obvious are the legal risks.

One area of risk is the Fair Labor Standards Act (“FLSA”) which requires non-exempt employees to be paid the minimum wage for all hours worked. Non-exempt employees must also receive 1.5 times their regular rate of pay for all hours in excess of 40 in a workweek.

The $64,000 question, however, is whether the unpaid intern is an “employee” within the meaning of this and other federal and state statutes. The Department of Labor (“DOL”) has adopted six criteria for evaluating this issue. They are as follows: 

1. he internship should be similar to the training given in a vocational school;
2. The training must be primarily for the benefit of the intern, not the employer;
3. The intern must not displace any regular employees, but must work under close supervision;
4. There should be no immediate advantage to the employer and, in fact, operations may be impeded by the training;
5. The intern must not be entitled to a job at the completion of the internship; and
6. The intern and the employer must understand that the intern shall receive no pay for the training. 

In one case, a company requested an opinion from the DOL as to whether unpaid interns who received college credit to work 7 to 10 hours per week as field marketers were employees. There was a coordinator who advised the students and communicated regularly on their progress. There was no obligation to hire them. The DOL found that four of the six criteria were established: (i) training similar to vocational school; (ii) no expectation of compensation; (iii) training primarily for the benefit of the intern; and (iv) no obligation of hiring.

On the two remaining questions, displacing regular employees and whether the company derived an immediate benefit, the DOL indicated the record was not clear. This opinion letter indicates employers should not assume the DOL will not carefully scrutinize these relationships. DOL has affirm its view in a subsequent formal opinion letter.

If a company is using unpaid interns, it should make sure:

1. It has an agreement or letter making it clear there is no pay and no guaranteed job;
2. Adopt a policy that sets up strict supervision and assigns a mentor;
3. Ensure the primary benefit of the internship is for the student, not the employer -- minimize assigning the same duties given to regular employees, do not use interns to displace any employees, and, if possible, require college credit; and
4. Arrange for a structured program of internal and, if possible, external instruction of the type of work done by the employer.

Remember, a determination that an unpaid intern is, in fact, an employee can have impact beyond minimum wage and overtime. The discrimination laws, worker’s compensation coverage, state and federal tax laws, employee benefits and unemployment insurance coverage all pose potential consequences in the event of a misguided classification.

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