Archives for October 2014

Wage Laws Require Both Proper Payment and Good Record Keeping

When it comes to paying employees their wages, being practical sometimes is not quite good enough. So learned a group of restaurant owners who insisted their workers received all the wages due to them under federal law, but lost a $129,000 judgment on the issue nonetheless. The case offers two important lessons for employers: First, be sure to comply with both the technical and practical requirements of wage payment laws; and second, don’t  pick legal fights with federal wage and hour auditors unless absolutely necessary.

In the case, which dealt with minimum wage requirements under the U.S.’s Fair Labor Standards Act, the employer restaurant sought to apply the tip credit to its wait staff employees. The credit allows employers to pay a reduced hourly rate to employees who regularly receive tips as part of their jobs. In all cases, the credit must meet a minimum rate and the employees’ total wages, when tips are included, must satisfy the minimum wage rate in effect. Employers are required to keep records of hourly payments and tips for each employee, and those records must be available for state and federal auditors on request. Employers are also required to give notice to their employees that the tip credit system is being applied to them. The employers in this case did not do so. Though they claimed that their employees earned far more than the minimum wage when tips were considered – a claim that might well have been true – they did not keep records of those tips. Still, they challenged a federal audit result in court. The result was the large judgment, which will increase substantially when interest is added.

In Massachusetts, tip credits are governed by a state statute. Employees must be notified the credit is being applied and records of wages paid must be properly maintained. Massachusetts employers are, of course, governed by federal law as well. As a result, employees in restaurants, who are exempted from overtime requirements by state law, must receive overtime for hours above 40 each week. The effect on the tip credit is to increase both the hourly rate that must be paid for hours above 40 weekly and the gross wages that must be earned once tips are included. Massachusetts law currently requires that tipped employees receive $2.63/hour, and the rate will increase to $3.75 over the next several years. The state’s minimum wage, now at $8/hour, will also increase, to $11 by 2017. Violators can be punished with triple damages and legal fee awards.

U.S. Appeals Court Finds that Massachusetts’ Independent Contractor Statute Could be Precluded by Federal Law

In  a decision that could have broad implications for enforcement of Massachusetts’ tough employee classification law, the U.S. Court of Appeals has concluded that federal law just might make it null and void, at least as it applies to motor carriers. The problem, the court held, is that one of three tests under Mass. Gen. L. ch 149, s. 148B may infringe upon the federal government’s superior authority to regulate interstate commerce.

Relying on the FAAAA (Federal Aviation Administration Authorization Act),  a federal law that bars Massachusetts and other states from regulating the prices, routes or services offered by motor carriers, the Court of Appeals reversed a lower court’s award of judgment to the Massachusetts Attorney General. The AG is defending a suit brought by the Massachusetts Delivery Association, which argues that broad language in the Massachusetts Independent Contractor Statute  effectively bans courier companies from engaging delivery drivers as contractors. Same day delivery companies are being forced to hire drivers as employees, they argue. The result is higher prices and different routes and other services.

There can be little doubt that same day courier companies have been under fire in recent years because of the Independent Contractor Statute. Many of them have faced class action lawsuits that claim their contracted drivers are misclassified. Demands for damages have been in the millions of dollars, and some courier companies have changed their business models as a result.