WPI Wage Watch: Minimum Wage, Tip, and Overtime Developments (December Edition)

We remember when legislative and regulatory developments rarely occurred in December, but those days are behind us.

A Reminder About New Year's Eve & New Year's Day Rate Increases: Many minimum wage, tipped and exempt employee rates in New York will change on December 31, 2019, whereas numerous cities, counties, and states across the country will increase their rates on January 1, 2020. To understand the full (known) picture of these rate changes in 2020, see our annual rate change article, the November edition of Wage Watch, and, of course, keep reading this month's article (below we note additional 2020 changes).

U.S. Department of Labor Developments: On December 12, 2019, the U.S. Department of Labor (DOL) issued revised regulations clarifying when employers need not pay overtime on perks like employee discounts, tuition reimbursement, prizes of small value, and wellness benefits. The final rule clarifies and updates the federal Fair Labor Standards Act's (FLSA) “regular rate” requirements to focus on types of compensation that employers must include in the overtime calculation.

Additionally, the DOL extended the deadline to comment on proposed changes to FLSA tip-related regulations from December 9 to December 11. Entities that submitted comments include attorneys general from 18 states1 and Washington, D.C. who oppose the changes.

Caselaw Developments: After receiving briefing and hearing oral arguments, a divided Michigan Supreme Court held it lacked jurisdiction to issue an advisory opinion concerning whether the Michigan legislature’s strategy to enact two ballot proposals (one concerning minimum wage and the other paid sick leave) and then amend those proposals before their effective dates was consistent with the Michigan Constitution.

In an 81-page ruling, the U.S. Court of Appeals for the First Circuit affirmed a lower court's dismissal of a lawsuit that argued the U.S. State Department's Au Pair Program precluded Massachusetts from requiring host families to comply with state wage and hour laws as employers of visa holders who provide childcare services through that program.

Years ago Birmingham, Alabama enacted a minimum wage ordinance that never took effect because, shortly after its enactment, the state enacted a law preempting such local measures. The preemption statute has been the subject of litigation for years. A lawsuit by two workers against the Alabama Attorney General alleges the state law violates the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution. In the litigation's most recent trip to the Eleventh Circuit, the court held the plaintiffs lacked standing to sue the Alabama AG because they could not demonstrate that their alleged injuries (working at a rate lower than the Birmingham rate) were fairly traceable to the AG's conduct or that those injuries would be redressed by the declaratory and injunctive relief they requested. As a result, the court did not consider the merits of the plaintiffs' equal protection claim.

State-Level Developments: From coast to coast, state legislators and regulators were busy during 2019's final month.

Washington State: The Washington State Department of Labor and Industries finalized amending its rules governing standards for exempt executive, administrative, professional (including computer professionals), and outside sales employees. The rules redefine the duties test for an individual employed in an executive, administrative, or professional (EAP) capacity and establish pay thresholds for these exemptions, redefine the duties test for outside salespeople, and redefine the duties test and hourly rate for computer professionals. Notably, beginning in 2021, state EAP pay requirements will exceed the FLSA's soon-to-be-increased overall salary or fee amount. Additionally, for computer professionals paid hourly by employers with more than 50 employees, the hourly rate will exceed the FLSA rate beginning on July 1, 2020 when it will be at least 2.75 times the $13.50 state minimum wage per hour (thus reaching nearly $10.00 per hour more than the FLSA's $27.63 per hour requirement).

New York: Governor Andrew Cuomo (D) signed A 453, which, effective February 10, 2020, amends New York's Limited Liability Company Law to hold the top 10 members of a foreign LLC liable for wages owed for work performed in New York.

Additionally, increases to the state minimum wage will occur as scheduled on December 31, 2019. As part of the 2016 legislation (S. 6406) that scheduled the increases, the state's division of budget had to analyze the state economy and effect of wage increases to determine whether a temporary suspension or delay in any increase should occur. It concluded the rate increase should go forward, noting:

there is no definitive evidence to-date that the positive impact the State’s rising minimum wage has had on the incomes of low-wage workers has been associated with any significant loss of jobs. Although the economic forecast is not without risks, the current outlook for continued growth in employment and wages at a moderate pace should allow the State labor market to absorb the minimum wage increases scheduled for 2020.

Connecticut: During a special legislative session, legislators passed HB 7501, which, if enacted, will require the state labor department to propose new rules for tipped employees by April 1, 2020. HB 7501 details what the rules must cover; specifically, for employees that perform tipped and non-tipped duties, they must include a 20% rule akin to standards the U.S. Department of Labor previously included in its Field Operations Handbook. Additionally, within 30 days of finalizing the rules, the state labor department must conduct random audits of tipped employees in at least 75 Connecticut restaurants and prepare a report on compliance, which it must submit to the legislature within one year of the rules' adoption. In addition, HB 7501 provides that, for class actions alleging violations based on the amount of time tipped employees perform non-tipped duties, plaintiffs must prove an employer is liable to all class members.

Maryland: HB 166 and SB 280, both of which were enacted earlier this year, require the state labor department to propose regulations to require restaurant employers that apply a tip credit to provide tipped employees a written or electronic wage statement for each pay period that shows the effective hourly tip rate derived from employer-paid cash wages, plus all reported tips for tip credit hours worked each workweek of the pay period. In July 2019, the department issued a proposed wage statement rule. In December, it introduced a new proposed rule to exclude from tipped employee's regular rate tips received that exceed the tip credit amount and made further tweaks to the wage statement proposal. The revised rule proposes that, no later than two weeks following the end of a pay period, a restaurant employer must provide tip credit employees a tip credit wage statement for each pay period that reflects all reported tips for tip credit hours worked each workweek, which may be accomplished via an online system.

Florida: The Florida Supreme Court approved putting before voters at the November 3, 2020 election a ballot measure to amend the state constitution and increase the state minimum wage. Specifically, the proposal seeks to increase the minimum wage—which will increase from $8.46 to $8.56 on January 1, 2020, to $10.00 per hour on September 30, 2021—with $1.00 per hour increases occurring each subsequent September 30 until the minimum wage reaches $15.00 per hour on September 30, 2026. In subsequent years, the state will return to its existing practice of annually adjusting the minimum wage on September 30 based on changes to the consumer price index.

Additionally, HB 691 was referred to the Workforce Development and Tourism Subcommittee, the Appropriations Committee, and the Commerce Committee. The bill proposes, for years 2021 through 2025, that the state minimum wage will continue to be annually adjusted based on changes to the consumer price index, but that the rate will also increase by $1.00 per hour in 2021, and by $1.50 per hour in 2022, 2023, 2024, and 2025. In 2026, the rate will revert to a simplified annual adjustment based on consumer price index changes.

Pennsylvania: Legislators did not agree on an increase to the minimum wage, tipped and exempt employee pay levels before year-end. They now have until the end of January 2020 to reach a compromise; otherwise, the governor will direct the state labor department to resurrect proposed exempt employee pay increase rules it suspended while broader rate change negotiations occurred.

Maine: LD 1874 proposes to eliminate the sub-minimum wage employers may pay to individuals with a mental or physical disability.

Ohio: SB 243 would create a new statute governing compensation for travel time and/or preliminary or postliminary activities such as time spent checking scheduled assignments, work locations, email, voicemail, or calendars.

Local Matters: In Arizona, things got hot(ter than normal) at a Flagstaff City Council meeting where officials and the public discussed a pending study concerning the impact of the city's minimum wage ordinance, with various participants taking issue with the neutrality of the organization retained to conduct the study.

Per usual, Northern California's San Francisco Bay Area makes our monthly update. The city council in Half Moon Bay directed staff to draft a minimum wage ordinance that will require rates that exceed the state minimum wage. Also, a late addition: in late November, the Novato City Council corrected its recently enacted ordinance to clarify that: (1) the prohibition on waiving the law's requirements did not apply to sanctioned waivers via collective bargaining agreements; and (2) potential suspensions of increases to the local minimum wage if the state suspends its scheduled increase will apply to all three of the city's forthcoming rates; originally, only two of the three rates would halt in such an instance.

In Tacoma, Washington, the city council repealed its minimum wage ordinance, effective January 1, 2020, because the state minimum wage ($13.50 per hour as of January 1) will surpass the local rate, even with Tacoma’s annual adjustment.

We will continue to monitor and report on minimum wage and overtime developments as they occur.

See Footnotes

​1 The 18 states are: California; Delaware; Hawaii; Illinois; Iowa; Maine; Maryland; Massachusetts; Michigan; Nevada; New Jersey; New York; North Carolina; Oregon; Pennsylvania; Rhode Island; Vermont; and Washington.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.