Tip Pooling

Tip pooling in the hospitality industry has been affected by a recent act of Congress and a Minnesota class action that have garnered significant attention. The Congressional act will have limited impact on Minnesota employers because they continue to be subject to substantial restrictions on tip pooling under state law. Tip pooling is the practice of sharing tips between front-of-house staff and back-of-house staff. On March 23, 2018, Congress passed a budget reconciliation bill that included a rider amending the federal Fair Labor Standards Act (FLSA) and related tip pooling regulations. The FLSA prohibits employers from keeping tips received by their employees, including allowing managers or supervisors to keep any portion of employees’ tips, regardless whether the employer takes a “tip credit” toward the FLSA’s minimum wage requirement. (Minnesota law does not permit a tip credit in any event.) 

Employer That Failed to Pay Overtime Also Found Liable Under the National Labor Relations Act for Interfering with Protected Employee Rights

Defending a wage and hour class or collective action is one of the most difficult employment law challenges facing companies today. Penalties are steep, attorneys’ fees are significant, and liability can be hard to avoid. Employers should be mindful, however, that they may also face liability under the National Labor Relations Act (NLRA) if they do not properly respond to collective employee concerns raised in wage and hour lawsuits. A recent case, Village Red Restaurant Corp. d/b/a Waverly Restaurant, 366 NLRB No. 42 (2018), exemplifies the additional liability that employers may have under the NLRA if they ignore protected employee rights. 

Sixth Circuit Court of Appeals Holds That Transgender Discrimination Is Unlawful Under Title VII

Although the Trump administration has signaled its intention to shift away from the prior administration’s efforts to expand LGBTQ+ equity rights in the workplace, a federal appellate court recently held that discrimination based on an individual’s status as transgender or gender-transitioning is prohibited by Title VII of the Civil Rights Act of 1964. In EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., the Sixth Circuit Court of Appeals held that discrimination based on an employee’s status as transgender or gender-transitioning is prohibited sex discrimination under Title VII. In addition, the Sixth Circuit rejected the employer’s religious freedom defense. The Sixth Circuit is the third federal appellate court to rule in the last year that Title VII protections extend to LGBTQ+ status, reflecting a growing split of authority among the federal courts. See Hively v. Ivy Tech Community College (7^th Cir. April 4, 2017); Zarda v. Altitude Express (2^nd Cir. Feb. 27, 2018).

Testing, Testing: The U.S. Department of Labor is Testing a Wage and Hour Self-Reporting Program

On March 6, 2018, the U.S. Department of Labor (DOL) announced a new pilot program, the Payroll Audit Independent Determination (PAID) program. The PAID program encourages employers to self-report inadvertent overtime and minimum wage violations under the Fair Labor Standards Act (FLSA). According to the DOL, “the program's primary objectives are to resolve such claims expeditiously and without litigation, to improve employers' compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.”

The estimated start date for the PAID program is April of 2018. Here is what we currently know about the parameters of this new program:

Supreme Court Clarifies Narrow Definition of “Whistleblower” Under Dodd-Frank Act

On Wednesday, Feb. 21, 2018, the Supreme Court issued a ruling that significantly narrows the category of employees who may be protected whistleblowers under the Dodd-Frank Act.1 In a case entitled Digital Realty Trust, Inc. v. Somers, the Court held that Dodd-Frank’s prohibition on employer retaliation against whistleblowers only covers individuals who made reports of suspected violations of the securities laws to the Securities Exchange Commission (SEC).

Paul Somers was an employee of Digital Realty Trust, a San-Francisco based realty firm, whose employment was terminated by Digital Realty Trust in 2014, after he allegedly reported concerns of possible securities law violations by the company to senior management internally. Importantly, Somers did not bring his concerns to the SEC’s attention at any time. Following his termination, Somers brought suit against his former employer, alleging his termination constituted illegal retaliation for making the reports and thus violated the whistleblower protections of the Dodd-Frank Act. Both the district and appeals courts agreed with Somers, initially saying he was entitled to whistleblower protections even though he didn't disclose his allegations to the SEC.

Federal Judge Rules that Grubhub Drivers are Independent Contractors, Not Employees

With many laws protecting workers classified as employees and not offering protection for those classified as independent contractors, a worker’s classification has broad implications for the worker and for the company using the worker’s services. In the rise of the “sharing economy,” companies like Uber Technologies, Inc. and Grubhub, Inc. have classified their drivers as independent contractors; and workers have turned to the courts to challenge that classification. 

Trade Secrets Lawsuits Keep Trending Up: Are You Minding the Store?

Lawsuits involving claims for misappropriation of trade secrets are continuing to trend upward, even in an era when litigation as a whole is believed to have decreased. At a time when companies’ most sensitive confidential and proprietary business information is becoming ever more digitalized – and thus easily transportable – all employers should maintain vigilance in protecting their crucial business information. Not surprisingly, a significant amount of trade secret litigation involves situations where former employees accessed company information before their departures, copied it and later used that information to compete against the former employer.