Employment Policies and Practices

As previously discussed, recent decisions from the New York Supreme Court, Appellate Division, found a New York State Department of Labor (“NYDOL”) opinion letter was not a “rational or reasonable” interpretation of New York Labor laws and regulations. In Andryeyeva and Moreno, the Second Department found that “live-in” home health care aides, whom were historically paid for 13 of their 24-hour shifts, were required to be compensated for every hour of their shift, regardless of whether this time includes sleep and meal break periods.  These decisions align with the First Department case of Tokhtaman, which similarly found this 13-hour rule to be an improper interpretation of New York Labor laws and regulations.

In response, on October 6, 2017, the NYDOL issued an amendment to the Minimum Wage Order for Miscellaneous Industries and Occupations (the “Amended Wage Order”) on an emergency basis and without the public notice or comment period generally provided prior to amending Wage Orders.  The Amended Wage Order provides:

(b) The minimum wage shall be paid for the time an employee is permitted to work, or is required to be available for work at a place prescribed by the employer, and shall include time spent in traveling to the extent that such traveling is part of the duties of the employee. However, a residential employee–one who lives on the premises of the employer–shall not be deemed to be permitted to work or required to be available for work:

(1) during his or her normal sleeping hours solely because he is required to be on call during such hours; or

(2) at any other time when he or she is free to leave the place of employment.

Notwithstanding the above, this subdivision shall not be construed to require that the minimum wage be paid for meal periods and sleep times that are excluded from hours worked under the Fair Labor Standards Act of 1938, as amended, in accordance with sections 785.19 and 785.22 of 29 C.F.R. for a home care aide who works a shift of 24 hours or more.

12 N.Y.C.R.R. 142.2.1(b) (emphasis added).

The amendment, and the specific reference to federal regulations governing the FLSA, confirms the NYDOL policy that employers of home health care aides do not need to pay their employees for every hour of their 24-hour shift.  Rather, meal and break periods not otherwise compensated under the FLSA do not have to be paid.  The federal regulations, which are incorporated into the Amended Wage Order, state that an employer does not have to compensate an employee during “bona fide” break periods, which include meal periods where the employee is completely relieved of their duties and the normal 8-hour sleeping period.  These “bona fide” breaks comport with the 13-hour compensation practices of employers within the home health care industry prior to the decisions of Andryeyeva, Moreno, and Tokhtaman.  As such, the Amended Wage Order seemingly contradicts Andryeyeva, Moreno, and Tokhtaman, and reinforces the 13-hour wage rule.

The Amended Wage Order seems to directly address the concerns raised by the Court in Andryeyeva, Moreno, and Tokhtaman, but certainly does not solve the problem.  The Appellate Division decisions remain good law and have the potential to cause substantial back-pay liability that could ultimately bankrupt the entire home health care industry within New York.  Although the Amended Wage Order may help persuade the New York Court of Appeals to hear the issues presented in the recent cases, the current conflict between the New York State decisions, federal decisions addressing the issues (see Bonn-Wittingham v. Project O.H.R. (Office for Homecare Referral), Inc., 2017 WL 2178426 (E.D.N.Y. May 17, 2017); Severin v. Project OHR, Inc., 2011 WL 3902994 (S.D.N.Y. Sept. 2, 2011)),  and the NYDOL have caused a state of flux within the industry. While the Amended Wage Order provides support for employers within the industry who still intend on following the 13-hour rule, it is unclear if this rule would apply retroactively, leaving these employers still subject to substantial liability.

Employers in the home health care industry are strongly advised to consult with counsel to ensure compliance with these payment practices.

Cole Schotz will continue to monitor these issues and provide updates to its readers.

The New York Supreme Court, Appellate Division, issued two decisions in September that have serious ramifications for the home health care industry.  In Moreno v. Future Care Health Servs., Inc., 2017 WL 4018898 (N.Y. App. Div. Sept. 13, 2017) and Andryeyeva v. New York Health Care, Inc., 2017 WL 4019032 (N.Y. App. Div. Sept. 13, 2017), the Appellate Division, Second Department, found non-resident home health care aides must be paid minimum wage for all hours spent at a patient’s home.  These decisions mark a drastic change in the employment practices within the home health care industry and may have a lasting effect on both employers and patients in need of 24-hour care.

Historically, “live-in” home health care aides working 24-hour shifts within the patient’s home were compensated for 13 hours of their 24-hour shift.  This industry standard is in accordance with a March 11, 2010 opinion letter (“Opinion Letter”) from the New York Department of Labor (“NYDOL”), which interpreted minimum wage and overtime provisions of the New York Labor Law.  The Opinion Letter found that home health care aides working 24-hour shifts are “residential employees” and, therefore, did not have to be compensated during normal sleeping hours.  According to the Opinion Letter, live-in home health care aides only had to be compensated for 13 of the 24 hours, provided the aide was afforded at least 8 hours of sleeping time, 5 of which must be uninterrupted, and 3 hours of meal breaks.

Recently, however, the Second Department disagreed with the NYDOL finding the Opinion Letter to be in conflict with New York Labor Law. The plaintiffs in both Andryeyeva and Moreno were home health care aides employed to care for elderly and disabled patients and were required to work 24-hour shifts within the patient’s home.  Consistent with the Opinion Letter, the plaintiffs were not paid minimum wage for their entire 24-hour shift.  Instead, the Andryeyeva plaintiffs were paid minimum wage for the first 12 hours of their shift, and paid a flat rate for the remaining 12 hours.  Similarly, the Moreno plaintiffs were paid a flat rate per shift.  The plaintiffs in both cases, which were filed as class actions, argued that they were not “residential employees” and the sleep and meal break exceptions in the Opinion Letter were not applicable.  Thus, the plaintiffs contended that they were required to be paid minimum wage for the full 24-hour shift.

The Second Department agreed, finding that the Opinion Letter was neither a “rational or reasonable” interpretation of the New York Labor Law.  In both cases, the Court held that class members who maintain residences outside a patient’s home are considered “non-residential” employees and are entitled to minimum wage for the full 24-hours worked.

Andryeyeva and Moreno align with the First Department’s decision in Tokhtaman v. Human Care, LLC, 149 A.D.3d 476, 477, 52 N.Y.S.3d 89, 91 (N.Y. App. Div. 2017), and these decisions will have an enormous impact on the home health care industry.  Although these decisions may eventually be challenged before the New York Court of Appeals, in the interim home health care employers with “live-in” aides could be subject to substantial back-pay liability.  Home health care employers should consult with counsel to ensure compliance with these recent rulings.

New York City Mayor Bill de Blasio recently signed into law an amendment to the New York City Human Rights Law (the “NYCHRL”) prohibiting discrimination on the basis of uniformed service.  The amendment takes effect on November 19, 2017.

The term “uniformed service” is defined in the amendment to mean current or prior service in:

The United States Army, Navy, Air Force, Marine Corps, Coast Guard, the Commissioned Corps of the National Oceanic and Atmospheric Administration, the Commissioned Corps of the United States Public Health Services, Army National Guard, or the Air National Guard;

The organized militia of the State of New York;

Any other service designed as part of the “uniformed services” pursuant to the Uniformed Services Employment and Reemployment Rights Act;

Membership in any reserve component of the United States Army, Navy, Air Force, Marine Corps, or Coast Guard; or

Being listed on the state reserve list or the state retired list as described in certain military laws or the state equivalent.

The amendment gives both veterans and active military personnel all protections afforded under the NYCHRL, including safeguarding against employment discrimination.  Specifically, these protections include representing that a position is not available when it actually is, refusing to hire or employ, or to bar or discharge from employment, someone in the uniformed services, or to discriminate against uniformed service members in the compensation, terms, and conditions of their employment.  Likewise, the amendment prevents employers from discriminating against uniformed service members in matters of public accommodation, housing, real estate, and lending.  The Chair of the New York City Commission on Human Rights, Carmelyn P. Malalis, cogently stated that: “Veterans and active military and other uniformed personnel routinely put their lives on the line for people in this country.  The least we can do is guarantee them the same freedom, respect and opportunities as everyone else. This law will give veterans and active military and other uniformed personnel direct protection under the New York City Human Rights law.”  Please click here to view the full article.

New York based employers are encouraged to review their human resources and hiring policies to ensure compliance with the amendment to the NYCHRL prior to its November 19, 2017 effective date.

On August 31, 2017, the United States District Court for the Eastern District of Texas (the “Court”) invalidated the United States Department of Labor’s (“DOL”) changes to the Fair Labor Standards Act’s (“FLSA”) overtime exemption rules (the “Final Rule”).  The Final Rule was scheduled to go into effect on December 1, 2016 before the Court issued a nationwide injunction blocking the implementation of the Final Rule.  In that case, captioned “State of Nevada, et al. v. United States Department of Labor et. al., Case No. 4:16-cv-00731-ALM”, the plaintiffs questioned, among other things, whether the Final Rule was lawful, whether the DOL had the authority to promulgate the Final Rule and whether the mechanism for automatic updates to the salary level under the Final Rule were permissible.  The Court agreed with the plaintiffs, finding that the Final Rule is invalid.

By way of brief background, the FLSA provides that unless an individual is subject to an exemption, employees must be paid overtime for all hours worked over 40 hours in a workweek.  There are, however, numerous exemptions to the FLSA’s overtime requirements including, but not limited to, the executive, administrative and professional exemptions (the “White Collar Exemptions”).  The FLSA has always set 3 requirements for application of the White Collar Exemptions: (1) the employee must earn a salary (or fee) that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”); (2) the salary or fee must be in the requisite minimum amount (the “salary level test”); and (3) the employee’s job duties must involve executive, administrative or professional duties as defined by the applicable regulations (the “duties test”).  The Final Rule sought to change the salary level test for the White Collar Exemptions; however, the salary basis and the duties tests were to remain unchanged.  The Final Rule sought to increase the minimum salary required from $23,660 to $47,476 annually ($913/week).  The Final Rule also sought to increase the required annual salary for highly compensated employees from $100,000 to $134,004.  Significantly, the Final Rule also provided for automatic updates to the salary and compensation levels every three years beginning January 1, 2020 to account for inflation.

The Court found that when enacting the relevant provisions of the FLSA, Congress unambiguously intended for the White Collar Exemption to apply to employees who perform bona fide executive, administrative or professional duties.  That said, the DOL did not have the authority to implement a salary level test that could effectively eliminate the duties test proscribed by the statute.   The Court also noted that the Final Rule more than doubled the DOL’s previous minimum salary level, and could make an employee’s actual duties irrelevant if his/her salary were below the new threshold.  Judge Mizzant was clear that the DOL “has exceeded its authority and gone too far with the Final Rule” and the Final Rule was found to be invalid.  The Court’s decision ends months of speculation about whether the Final Rule, heralded as a major accomplishment of President Obama’s administration, would survive Donald Trump’s presidency.

Now that the Final Rule has been invalidated and compliance is moot, barring appeal or further administrative action, employers should take the opportunity to check the requirements of state law to see if their states impose different exemptions than those imposed by the FLSA.  By way of example, New Jersey adopts the FLSA White Collar Exemptions, and the salary level test is the same.  New York, however, increased the executive and administrative salary exemption thresholds effective December 31, 2016.  In New York City “large employers” invoking a “white collar exemption” must meet the salary threshold of $825/wk.  For “small employers” the salary threshold is $787.50/week.  These levels, however, are set to increase over the next few years and the amounts will differ in other parts of the State.

Employers should check here often for additional updates concerning the FLSA and changes to the exemption rules in New York and New Jersey.

As set forth in its July 20, 2017 Regulatory Agenda, the United States Department of Labor (“USDOL”) has announced its intention to rescind the controversial 2011 regulation enacted by the Obama Administration (the “2011 Regulation”), which restricted employers from requiring employees to share tips even when no tip credit is taken and tipped employees are paid the full minimum wage.

The 2011 Regulation established that tips are the property of the employee and thus cannot be forcibly distributed to other workers even if no tip credit is taken and the employee receives the full hourly minimum wage.  29 C.F.R. § 531.52.  By way of background, the Fair Labor Standards Act (“FSLA”) contains a tip credit provision, which allows employers of tipped employees the option of paying a reduced hourly wage rate of $2.13 as long as employees receive sufficient tips to bring their hourly rate to the applicable federal minimum wage.  If an employee does not receive sufficient tips to meet the minimum wage, the employer must pay the difference but the employee is also permitted to retain all extra tips. 29 U.S.C. § 203(m). The tip credit provision has resulted in disparity in the incomes of tipped employees and non-tipped “back of the house” kitchen employees.  For this reason, many restaurants and hospitality associations have turned to “tip-pooling,” which many believe allows for a more uniform distribution of income.

Following the enactment of the 2011 Regulation, courts have split as to the proprietary of the Regulation with the Tenth Circuit (covering Colorado, Kansas, New Mexico, Oklahoma, Wyoming and Utah), Fourth Circuit (covering Maryland, North Carolina, South Carolina, Virginia and West Virginia) and Eleventh Circuit (covering Alabama, Florida, and Georgia), holding that the Regulation is not valid and does not apply where an employee is paid the applicable minimum wage.  In contrast, in February 2016, in Oregon Restaurant and Lodging Association v. Perez, the Ninth Circuit held that the FLSA is silent on the question of whether employers who do not take a tip credit can use tip-pooling and, therefore, the USDOL could impose a regulation to fill the gap, thus finding the Regulation to be valid. The National Restaurant Association and other hospitality groups have asked the United States Supreme Court to grant certiorari to resolve this issue and that request is pending.

As the USDOL’s proposal to rescind the 2011 Regulation is subject to the rulemaking process, it will take some time to actually rescind the rule. Accordingly, employers outside of the Tenth, Fourth and Eleventh Circuits, including those in the Tristate Area, should continue abiding the 2011 Regulation until further notice.

Importantly, employers must also be mindful of similar state laws.  For example, New York employers in particular should note that New York’s Hospitality Wage Order and Labor Law restricts tip-pooling participation.