Wage-and-hour

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On February 4, 2019, Governor Phil Murphy signed into law a bill (A-15) that will increase New Jersey’s minimum wage to $15 per hour by 2024 for the majority of New Jersey’s workers.  Pursuant to the new law, the State’s minimum wage, which is currently $8.85 per hour, will increase according to the following schedule:

  • $10 per hour on July 1, 2019
  • $11 per hour on January 1, 2020
  • $12 per hour on January 1, 2021
  • $13 per hour on January 1, 2022
  • $14 per hour on January 1, 2023
  • $15 per hour on January 1, 2024

Notably, certain types of employees are placed on a slower path to $15.  For example, seasonal workers and employees working for businesses that employ 5 employees or less will not reach $15 per hour until 2026.  The minimum wage for farm workers will increase to $12.50 by 2024, with the possibility to attain $15 per hour by 2027 if approved by state officials.

New Jersey has now joined California, Massachusetts, New York, and Washington D.C., as well as other cities and localities, in raising the minimum wage to $15 per hour.

As the winter months bear down on us, many of us find our thoughts wistfully drifting to sun, sand, and all things summer.  Summer months, however, also bring (for most employers) summer interns and one of the more befuddling employment issues: do I have to pay my summer intern?  Stated another way: is my intern, in actuality, an “employee” under the Fair Labor Standards Act (“FLSA”) and therefore entitled to wages?

This confusion concerning the scope of the FLSA with respect to interns has been driven by the lack of any uniform standard for assessing whether an intern is an “employee.”  Although comprehensive, the FLSA does not define “employee” in any meaningful fashion.  To the contrary, an “employee” is defined in a circular, broad fashion as “any individual employed by an employer.”  29 U.S.C. § 203(e)(1).  To cope, both the courts and the United States Department of Labor (“DOL”) have relied upon a variety of competing analytical frameworks to analyze whether an individual falls within the foregoing definition.  By way of example, the DOL previously relied upon a “rigid” six-factor all-or-nothing test while the Second, Ninth, and Eleventh Circuit Courts (to name a few) have relied upon a more flexible balancing of seven factors, an analysis, referred to as the “primary beneficiary test,” to determine employee status.

Earlier this month, however, some much-needed clarity and uniformity on the issue arrived.  As of January 5, 2018, the DOL abandoned its previous approach to the issue and accepted the “primary beneficiary test” as the standard for determining whether an individual is an employee under the FLSA.  See Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act.  Reminiscent of the colloquial “if it looks like a duck, quacks like a duck, then it’s a duck” mentality, the primary beneficiary test focuses on seven factors aimed at ascertaining the true “reality” of a relationship between the employer and the intern/employee.  As set forth in the DOL’s January 2018 Fact Sheet, these factors include:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee, and vice versa;
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

No single factor is dispositive; rather, the test is flexible and intended to accommodate the unique circumstances of each case.  The DOL’s acceptance of this test will likely usher in the beginning of more wide-spread acceptance, use, and perhaps uniformity with regard to the treatment of interns.

Although some have pontificated that this change in the DOL’s position may “revive” unpaid internships, the true effect of the shift in position remains to be seen.  While there is now greater uniformity in how the government and courts may view an “employee” under the FLSA, the matter is far from settled.  Indeed, courts have yet to determine a uniform approach to the issue and, as a result, the framework under which an internship program is assessed will still depend on the jurisdiction.  Employers utilizing unpaid internship programs should continue to familiarize themselves with the analysis utilized in their state as well as the primary beneficiary test.  Employers must also remember that each case is, of course, fact-specific and context-driven.

On October 19, 2017, the Court of Appeals for the Third Circuit ruled that New Jersey based Mary Kay consultants could not bring a claim in New Jersey federal court against Mary Kay for alleged violations of the New Jersey Wage Payment Law (“NJWPL”).  The court relied upon the broad forum-selection clause in the consulting agreements between the parties, which mandated that “any dispute or controversy . . .  concerning any matter relating to this Agreement . . . be submitted to the jurisdiction of the courts of the State of Texas.”

The consultants – New Jersey residents who performed their work under the agreements in New Jersey – argued that their statutory-based NJWPL claim did not fall within the scope of the forum-selection clause.  The court, applying Texas law in accordance with the contracts’ choice-of-law provisions, concluded that because the claim related to the working relationship between the consultants and Mary Kay, the claim necessarily implicated the contents of the consulting agreements.  Because the consultants did not overcome their exceptionally heavy burden of avoiding the enforcement of the Texas forum-selection clause, the Third Circuit affirmed the lower court’s dismissal of the action.

While the decision represents a strong win for employers and the freedom to contract, its implications are not without limitation.  Parties are not at liberty to select forums and governing laws that have absolutely no relationship to the parties and the dispute.  Here, the parties’ choice of Texas law and the Texas forum undoubtedly had the requisite connection to the parties and the dispute, as Mary Kay is headquartered in Texas.

Additionally, as the court took pains to point out, the consultants did not challenge the enforceability of the forum-selection clause, and instead limited their arguments to the scope of the clause.  Cognizant of the “predicament” for plaintiffs seeking the substantive protections of the employment laws of their home state, where they perform substantially all of their work, the court explained that it is incumbent on plaintiffs to challenge the enforceability of the clause itself, not merely its scope.

Parties to employment contracts are strongly encouraged to carefully consider the ramifications of choice-of-law and forum-selection clauses before litigation arises, lest they find themselves in a foreign jurisdiction with laws which may be unfavorable to their interests.

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.