DOL Announces New Overtime Audit Program



DOL WHD PAID audit overtime minimum wage Alabama Employment Law
The DOL’s PAID program hopes that voluntary audits will result in better compliance with overtime and minimum wage requirements.

On March 6, 2018, the United States Department of Labor’s Wage and Hour Division (“WHD”) announced a new, voluntary audit program aimed at improving employers’ compliance with overtime and minimum wage requirements.  The program is called the Payroll Audit Independent Determination (“PAID”) program.  Here is a link to the DOL’s question-and-answer sheet on PAID:  Coming Soon: PAID

At this point, details on the program are scarce.  It will be a pilot program for six months, after which WHD will evaluate its effectiveness.  All employers covered by the Fair Labor Standards Act (“FLSA”) will be eligible to participate.  Employers will self-audit their compensation practices and identify potentially non-compliant wage practices.  They will then identify the potential violations to WHD.  Potentially, employers can benefit from this program because WHD will not require them to pay liquidated damages or civil monetary penalties for any voluntarily-disclosed violations.

WHD’s Acting Administrator, Bryan Jarrett, wrote an op-ed for The Hill discussing the new program, and it can be found here:  PAID Program a Win-Win-Win.  One interesting aspect of Mr. Jarrett’s op-ed is his observation that current laws prevent “employers from simply paying the wages due to conclusively settle overtime or minimum wage violations.”  That statement correctly recognizes that the only way to conclusively settle an FLSA claim is through litigation and a settlement in which a Judge finds the settlement fair and reasonable for the employee.  Rather than facing the issues arising from such suits, some employers simply refuse to pay money legally owed to an employee.

As with any new area of the law, the devil is in the details.  I will keep an eye out for details on the PAID program as they emerge, and attempt to keep you up-to-date.

Nothing to Dance About: FLSA and Adult Entertainment

FLSA dancers minimum wage Alabama Employment Law
Dancers at adult clubs claim that they are “employees” under the FLSA.

I’m sure you will surprised to hear this:  allegedly employers in the adult entertainment industry aren’t vigilant about complying with the law.  I previously wrote about the dangers of age discrimination at a “gentlemen’s club” in South Alabama here:  Age Discrimination and Dancers.  Now, one entertainer at a North Alabama landmark, Jimmy’s Lounge, has apparently decided to claim a violation of her rights to fair pay under the Fair Labor Standards Act (“FLSA”).  See Miller v. JAH, LLC, No. 5:16-cv-01543-AKK, 2018 WL 305819 (N.D. Ala. Jan. 5, 2018).

In an attempt to adequately describe Jimmy’s Lounge for non-Huntsvillians, I went to their Facebook page.  Their cover photo is a woman who is scantily “clothed” — in pizza.  Their “about” description is short:  “#1 Gentlemen’s Club.”  Hopefully, you get the picture.

Breeana Miller has decided to sue this renowned establishment, claiming that she is an employee who hasn’t been paid correctly under the FLSA.  Additionally, Ms. Miller has asked United States District Court Judge Abdul Kallon to certify a class action of all people who danced at Jimmy’s from September 16, 2013 to September 16, 2016.  The opinion released by Judge Kallon last week discussed that request for class certification and sheds some light on Ms. Miller’s claims.

Ms. Miller claims that Jimmy’s dancers are employees, covered by the FLSA, but they are not paid minimum wage as required by the FLSA.  Instead, their sole pay comes from the tips of patrons.  Ms. Miller claims that she is an employee because Jimmy’s maintains control over the terms and conditions of her work, including:  paying “tip out” fees to management and other non-tipped employees; requiring them to report to work at specific times with specific shifts; setting the prices of private dances; and, imposing monetary penalties for absences, lateness, leaving early, and their weight.

Jimmy’s denies that the dancers are employees, and instead claims the dancers are independent contractors.  Only employees can sue for violations of the FLSA.  Judge Kallon’s opinion does not provide much information discussing the details of Jimmy’s independent contractor defense.

Federal judges frequently grant conditional certification of a class in FLSA actions, and allow plaintiffs like Ms. Miller to contact potential class members.  Judge Kallon’s opinion discussed an interesting request by Ms. Miller to contact former dancers by e-mail and text message — claiming that dancers tend to move frequently.  Judge Kallon denied that request for now, and he seemed particularly reluctant to allow contact by text message.  Nevertheless, he seemed open to reconsidering the request if traditional contact by mail was unsuccessful.

I will try to keep tabs on this case and keep my faithful readers updated.  In the interim, if you assume that Ms. Miller’s accusations are true, the best lesson to be learned is one that I’ve talked about before.  Merely labeling somebody an “independent contractor” does not automatically prevent them from being considered your “employee”:  How “Independent” Are Your Independent Contractors.  The test for determining whether a worker is an “employee” for purposes of the FLSA can be a complex one, and it will be interesting to see what the evidence reveals as this case goes on.




FLSA: Restaurant Owners Can Take Tips From Employees

Resaturant FLSA tips minimum wage
The FLSA does not prohibit restaurant owners from taking the tips of employees who are otherwise paid the minimum wage.

In a one-sentence opinion, the Eleventh Circuit Court of Appeals recently held that the Fair Labor Standards Act (“FLSA”) does not prohibit restaurant owners from taking the tips of their employees:

Having carefully considered the written submissions and the arguments of the parties and of the amicus curiae, we conclude there is no free standing claim for relief under Section 203(m) of the Fair Labor Standards Act, 29 U.S.C. § 203(m), where, as here, there is no allegation that the employer does not pay the minimum wage.

Aguila v. Corporate Caterers IV, Inc., No. 16-15838, 2017 W 1101081 (11th Cir. Mar. 24, 2017).

With that one sentence, the Court affirmed the decision of the trial court in Auguila v. Corporate Caterers, II, Inc., 199 F.Supp.3d 1358 (S.D. Fla. 2016).  In that case, the plaintiffs were delivery drivers who claimed that they were supposed to receive tips, but their employer retained some or all of those tips.  They did not claim that their employer failed to pay them minimum wage.

At its heart, the FLSA is designed to ensure that employees are paid:  (1) minimum wage; and, (2) applicable overtime.  Section 203(m) of the FLSA deals with the minimum wage for tipped employees.  It allows employer to pay less than the federally-mandated minimum wage by using the employees’ tips as part of wages.  In short, the employer-paid wage, plus tips, should exceed minimum wage.  This “tip credit” is frequently misused by employers, who are then sued under the FLSA for failing to pay the correct minimum wage.

But, the employees in Aguila did not claim that they were paid less than minimum wage.  Instead, they argued that Section 203(m) of the FLSA gave them an independent right to retain their tips.  The employees were asking the Court to expand the scope of the FLSA beyond minimum wage and overtime to include a new right to retain tips.  They based their arguments on 2011 regulations issued by the United State Department of Labor and a decision from the Ninth Circuit Court of Appeals (traditionally one of the most liberal federal courts).  Despite those arguments, the trial court and the Eleventh Circuit in Aguila declined to expand the FLSA.

Aguila should not be taken as carte blanche authorization for employers to seize their employees’ tips.  Aside from morale problems, employees could potentially sue in state court for fraud and conversion — both of which carry the possibility of punitive damages.  Instead, Aguila should merely be read as a decision limiting the scope of federal power over employers.

Birmingham’s Minimum Wage Ordinance Suffers Another Setback

Birmingham minimum wage
A federal judge rejected an effort to enforce Birmingham’s minimum wage ordinance.

On February 1, 2017, United States District Court Judge David Proctor rejected an attempt to force businesses to comply with Birmingham’s minimum wage ordinance. In February 2015, the Birmingham City Council passed an ordinance requiring all businesses to pay a minimum wage of at least $10.10 per hour.  The federally-required minimum wage is $7.25 per hour, and Alabama does not have a state-mandated minimum wage.

In response to Birmingham’s ordinance, in 2016 the Alabama Legislature enacted the Alabama Uniform Minimum Wage and Right-to-Work Act.  That Act establishes the Legislature’s “complete control” over minimum wage policy in the State.  After passage of that Act, Birmingham declined to enforce the minimum wage ordinance, and Alabama Attorney General Luther Strange advised Birmingham businesses on the enforcement of the ordinance.

The NAACP, Greater Birmingham Ministries and several individuals sued the State of Alabama, the City of Birmingham, Attorney General Strange and Birmingham Mayor William Bell.  Primarily, this was a race-based challenge to the Alabama Act.  The plaintiffs claimed that the purpose and effect of the Act was to transfer control over minimum wages and all matters involving private sector employment in the City of Birmingham from municipal officials elected by a majority-black local electorate to legislators elected by a statewide majority-white electorate.

Judge Proctor dismissed the law suit primarily under the legal doctrine of standing.  Essentially, Judge Proctor found that the City and State officials were not responsible for any damages that the individual plaintiffs might suffer.  Instead, local employers who refuse to comply with the Birmingham minimum wage ordinance would cause the damage:  “[N]othing this court could order Attorney General Strange or the City Defendants to do will affect Plaintiffs’ wages.  Plaintiffs’ employers set those wages and it is the courts who will determine whether there is any violation of law with respect to the setting of those wages.”

Judge Proctor’s decision provides some reassurance to Birmingham employers that they are only subject to the federally-mandated minimum wage.  Nevertheless, his decision leaves open the possibility that individual employees might sue their employers for violating the Birmingham minimum-wage ordinance.  Undoubtedly, any employers sued under the ordinance will raise the Alabama Uniform Minimum Wage and Right-to-Work Act as a defense.

Federal Contractors: Minimum Wage Increases to $10.20

Federal contractor minimum wage
The minimum wage for employees of federal contractors will increase on January 1, 2017

The minimum wage for employees of many federal contractors will increase to $10.20 per hour effective January 1, 2017.  President Obama’s Executive Order 13658 established a minimum wage for contractors working under four major categories of federal contracts:

  1. Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
  2. Service contracts covered by the Service Contract Act (SCA);
  3. Concessions contracts, including any concessions contract excluded from the SCA by the Department of Labor’s regulations at 29 CFR 4.133(b); and
  4.  Contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

Effective January 1, 2015, the minimum wage was set at $10.10 per hour, and that wage has seen five cent increases over the last two years.  On September 20, 2016, the United States Department of Labor announced the increase for 2017.  The notice of wage increase and an updated workers’ rights poster can be found here:  Minimum Wage Increase


Federal Contractor Minimum Wage:  Complying With President Obama’s Executive Order

A gavel and a name plate with the engraving Minimum Wage
A gavel and a name plate with the engraving Minimum Wage

Effective January 1, 2016, many federal contractors are required to pay their employees a minimum wage of $10.15 per hour.  This requirement applies to:  (1) Contracts/replacement contracts that result from solicitations issued on or after January 1, 2015; (2) Modifications of existing contracts which have more than 6 months remaining on their term; and, (3) Service Contract Act and Davis Bacon Act Contracts.  The minimum wage requirements are the result of President Obama’s Executive Order 13658.

Importantly, the Executive Order also requires notification of employees.  The Department of Labor has issued a revised “EEOC is the Law” poster, which can be found here:  Poster

Finally, the minimum wage requirements must be flowed-down to subcontractors, which can be accomplished with the addition of the following language to the subcontract:  “Executive Order 13658 – Establishing a Minimum Wage for Contractors, and its implementing regulations, including the applicable contract clause, are incorporated by reference into this contract as if fully set forth in this contract. FAR Clause 52.222-55, Minimum Wages Under Executive Order 13658 (Dec 2014) (Executive Order 13658).”

Take some time to review your contracts and make sure you comply with Executive Order 13568.