Failure To Pay Minimum Wage Can Jeopardize Employment-Based Visa Petitions

minimum wage employment-based visa petitionsRudyard Kipling famously noted, “East is East, and West is West, and never the twain shall meet.” Many employers may feel that this quote aptly describes the relationship between immigration law and wage & hour law — certainly, it is not often that these two areas are discussed in the same article, let alone the same sentence. However, a recent U.S. Citizenship & Immigration Services (USCIS) policy memorandum illustrates a circumstance in which the government will take wage & hour considerations into account when addressing a visa petition.

The April 12, 2017 policy memorandum binds all USCIS personnel to follow the reasoning of the agency’s earlier Administrative Appeals Office (AAO) decision. In that AAO decision, the agency establishes policy guidance which clarifies that USCIS cannot approve an employment-based visa petition that is based on an illegal or otherwise invalid employment agreement. Specifically, before approving an employment-based visa petition, it must be established that the employment visa beneficiary will not be paid less than the state or federal hourly minimum wage. (Whichever has the highest minimum wage is the minimum to follow.)

The AAO decision involved a U.S. semiconductor manufacturing company’s petition, in which it sought to temporarily employ a “Failure Analysis Engineer” in Oregon under the L-1B nonimmigrant specialized knowledge classification for intracompany transferee employees. USCIS California Service Center had denied this petition, concluding that the evidence did not show that the beneficiary had specialized knowledge or would be employed in a capacity requiring specialized knowledge. However, the AAO decision identified an overreaching issue that it determined had to be dealt with prior to addressing the issue of specialized knowledge. Namely, the U.S. employer intended to pay the beneficiary less than the minimum hourly wage. The AAO decision made clear the agency’s position that under no circumstances is a U.S. employer allowed to pay an employment visa beneficiary below the highest applicable minimum state or federal hourly wage.

Through this AAO decision, USCIS employment visa adjudicators have been instructed to prevent a conflict with the Fair Labor Standards Act by ensuring that any prospective employment agreement between a U.S. employer and a foreign national worker allows for compensation that cannot be less than the higher government-required hourly wage, whether it be the state or federal minimum — only if that highest minimum hourly wage is met can USCIS approve a U.S. employer’s employment visa petition. As we have frequently discussed in these updates, there are many reasons that it is critical for employers to comply with wage and hour requirements. Employers now have another reason to ensure compliance with the FLSA and state minimum wage laws: the risk of jeopardizing employee visa status.

© 2017 Foley & Lardner LLP

Tip Credit Does Not Apply to Delivery Drivers Declares Connecticut Supreme Court

delivery drivers pizza tip creditIn a decision released on April 4, 2017, the Connecticut Supreme Court found that employers cannot take advantage of a “tip credit” for delivery drivers in order to meet the state minimum wage.

The case, Amaral Brothers, Inc. v. Department of Labor, addressed the issue of whether delivery drivers (in this case, drivers for a pizza chain) fall within the scope of employees who are eligible for a “tip credit.” Under Conn. Gen. Stat. § 31-60(b), a tip credit may be taken for “persons, other than bartenders, who are employed in the hotel and restaurant industry . . . who customarily and regularly receive gratuities.”

A tip credit allows businesses—namely, hotels and restaurants—to pay “service employees” salaries below the state minimum wage. This is because employees in some positions, on account of their service to customers, normally receive gratuities in addition to their base wages, making up any difference between their salaries and the minimum wage rate. Specifically, a “service employee” has been defined as “any employee whose duties relate solely to the serving of food and/or beverages to patrons seated at tables or booths, and to the performance of duties incidental to such service, and who customarily receive gratuities.”

The Connecticut Department of Labor (CT DOL), the agency responsible for enforcing the minimum wage requirement, determined that delivery drivers were not tip-credit eligible, primarily because it found their “service” was limited to passing food to customers at their door. The CT DOL rejected the plaintiff’s argument that a driver transporting pizza to a customer’s home in a car is comparable to a waiter carrying food to a customer at a table.

Upon appeal by the pizza restauranteur, the Connecticut Supreme Court affirmed that delivery drivers do not fall within the scope of the tip credit. The court held that it was “reasonable for the department to conclude that the legislature did not intend that employees such as delivery drivers, who have the potential to earn gratuities during only a small portion of their workday, would be subject to a reduction in their minimum wage with respect to time spent traveling to a customer’s home and other duties for which they do not earn gratuities.”

With this ruling by the Supreme Court affirming the position of the CT DOL, it can be expected that the agency will pay close attention to how delivery drivers are paid in Connecticut. Accordingly, those in the restaurant and hotel industries should take time to review how their delivery drivers are paid. In addition, if waitstaff are also utilized as delivery drivers, it is best practice to break out the time spent on each of those duties if the tip credit is being utilized, so as to have adequate records if challenged.

© 2017, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

San Marcos, Texas Joins Growing Ranks of Cities Raising Minimum Wage to $15 Dollars

San Marcos Texas Minimum wageTaking its cue from other, larger cities, San Marcos, Texas, recently voted to raise the minimum wage to $15 dollars per hour for businesses applying for tax breaks and others incentives to build or expand in the city. In addition to the higher wage, businesses must also offer all employees and their dependents benefits equal to those offered to full-time employees. The San Marcos City Council saw requiring the higher pay rate as a way businesses could return the favor of receiving tax incentives to the local economy. This new law applies only to future businesses seeking economic development incentives, and not companies already doing business in San Marcos.  The city joins the ranks of cities such as Los Angeles, Seattle, San Francisco, and Washington, D.C. that require a “living wage.”

Key Takeaways for Businesses in San Marcos

Businesses seeking tax incentives to build or expand in San Marcos need to be prepared to pay a higher minimum wage and offer benefits to all of employees. This trend is likely to continue in other cities across the nation.

© 2016, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

Alaska Minimum Wage, Tip Credit, and Overtime Rights Ruling: Gallo’s and Taco Kings

alaska wage and hourOn Dec. 12, 2016 the Alaska Wage and Hour Division announced a settlement with a small chain of restaurants local to Alaska in the amount of $835,000.00.[1] Considering this is a small locally owned business this a staggering amount.  To put this in perspective there are a total of only 9 eating establishments involved, three Gallo’s and six Taco Kings. Gallo’s are traditional sit down restaurants with full service.  Taco Kings are small walk up and order off a menu board establishments with self-serve soda fountains and condiments and no wait staff.

In conversations with persons at both Gallo’s and the Alaska Wage and Hour Division it became clear that the overtime issues had been ongoing for several years.  The current settlement was related to an audit conducted by the Alaska Wage and Hour Division and covered the period of Nov. 2013 to Dec. 2015.[2]  Prior to the recent settlement, dating back to 2011, Gallo’s/Taco King had settled six previous complaints for a total of $50,000.[3]  It was this systemic abuse of the Alaska overtime law that led to the audit which revealed overtime being owed to 159 employees.[4]

Alaska law requires workers be paid minimum wage (currently $9.75/hr. and increasing to $9.80/hr. on Jan.1, 2017) with time and a half paid for overtime over 40 hours in a week.[5]  Alaska does not allow for a tip credit[6] and as such this was a straight overtime case.[7]

Despite this being an overtime violation case, a settlement of this significance will tend to catch the attention of restaurant workers around the country.  Add to that the recent nationwide injunction issued by Judge Mazzant with respect to the Final Rule,[8] there is likely to be heightened awareness of minimum wage and overtime rights among workers in general.  As such it is probably worthwhile for practitioners to remind their clients and perhaps update policies with respect to tipped employees.

Federal wage law as it relates to wait staff allows for a tip credit, but still requires that wait staff earn at least minimum wage when the hourly wage and tips are added up for the hours worked.[9]

One of the requirements of the tip credit often overlooked is the requirement that the employer inform the employee of the tip credit.  According to DOL Wage and Hour Division Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act, employers must inform tipped employees of the following before the tip credit can be applied:

1) The amount of cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour;

2) The additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required cash wage of $2.13 and the current minimum wage of $7.25);

3) That the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;

4) That all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and

5) That the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

Failure to properly inform the tipped employee of the credit entitles the worker to receive both the Federal Minimum Wage of $7.75 and all of the tips received.[10]  Although the notification can be either verbal or written, it is advisable that employers have their employees sign a formal notification that the tip credit allowed under Federal law is being utilized by the employer to ensure minimum wage requirements are being met.

Cases like Gallos/Taco King are becoming more frequent as workers become more educated about their rights.  While many employers are taking advantage of employees’ ignorance of employment laws, in particular minimum wage/overtime, many more are making innocent mistakes which could result in significant violations. Now is the perfect time to be proactive to make sure employers who have tipped employees are not hit with significant wage violations for not having informed their employees of the tip credit.

© 2016 University of Alaska Fairbanks

[1] Press Release No. 16-45 – State of Alaska Dept. of Labor and Workforce Dev., Heidi Drygas, Commissioner

[2] Conversation with Commissioners office of the Alaska Wage and Hour Division on Dec. 14, 2016. 

[3] Id

[4] Above Note i

[5] Alaska Statute Sec. 23.10.065.

[6] Id.  According to the DOL 6 other states (California, Minnesota, Montana, Nevada, Oregon and Washington) and Guam also do not allow for a tip credit.

[7] Above Note ii

[8] Nevada et al. v. U.S. Department of Labor et al., —F.3d—, 2016 WL 6879615 (Civil Action No.4:16-CV-00731) U.S.D.C (E.D. Tex. Nov.22, 2016).

[9] 29 U.S. Code Sec. 3(m)

[10] DOL Wage and Hour Division Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (Revised July 2013)

Arizona Voters Approve Paid Sick Leave for Employees and Minimum Wage Increase

Arizona Minimum Wage and Paid Sick Time OffThe election results are in, and President-elect Donald Trump’s victory over Secretary Hillary Clinton has the nation abuzz and undoubtedly will for the foreseeable future.  However, the Presidential race was not the only notable race or measure on the ballot.  Although the dust hasn’t quite settled from last night’s historic vote, there a number of approved ballot measures that employers will need to understand and prepare for immediately.

Specifically, in Arizona, the Minimum Wage and Paid Sick Time Off Initiative, also known as Proposition 206, passed by a 59% to 41% margin.  The paid sick time component of the law will go into effect July 1, 2017, while the minimum wage increase begins in just a few months by raising the Arizona minimum wage to $10.00 per hour effective January 1, 2017.

The first component of the new Arizona law inserts Article 8.1 entitled “Earned Paid Sick Time” into Section 5, Title 23, Chapter 2 of the Arizona Revised Statutes.  The new paid sick time law applies to covered employers regardless of the number of employees; a covered employer with at least one Arizona employee is obligated to comply with the law.  Accrued paid sick time may be used for the employee for his or her own mental or physical illness, injury or health condition; or to care for a family member’s – as the term family member is defined under the statute – mental or physical illness, injury or health condition.  Here are the major points of emphasis:

All employees will accrue paid sick time at a minimum rate of one hour for every 30 hours worked for the employer.

Employees of an employer with 15 more employees may cap maximum annual accrual of paid sick time at 40 hours, while smaller employers may cap the maximum annual accrual at 24 hours.

Employees who are exempt under the Fair Labor Standards Act of 1938 (“FLSA”) will be assumed to work 40 hours in each work week for purposes of calculating paid sick time accrual, unless their normal work week is less than 40 hours, in which case earned paid sick time accrues based on actual hours worked.

Unused earned paid sick time must be carried forward to the following year consistent with the accrual limits of the statute. Employers may forego this requirement by following a procedure specified in the statute.

A 90-day probationary period for new employees may apply to the use, but not accrual, of paid sick time.

The new law includes specific employee protections making it unlawful for an employer to retaliate or discriminate against an employee for exercise of his or her use of paid sick time.

Further complicating the new law will be the statutory provision allowing employers to do away with the accrual method in favor of simply providing an employee at the beginning of the year all earned paid sick time that an employee is expected to accrue during the year.  (This provision brings Arizona’s law relatively on par with neighboring California’s paid sick time law.)  The new Arizona law contains other provisions explaining issues such as an employer’s ability to pay its employees for earned, unused paid sick time rather than carrying it forward to the next year; notice required by the employee for use of paid sick time; and the employer’s ability to request documentation to verify proper use of paid sick time.   Notably, the law does not require the payment of accrued but unused paid sick time upon termination of employment.

Employers should note that the provisions of the new paid sick time law are minimum requirements, and nothing in the new law prevents an employer from establishing a more generous policy or continuing one already in place.

The second component of the new Arizona law adjusts Arizona Revised Statute § 23-363 to require a gradual increase of Arizona’s minimum wage beginning this coming January.  Arizona’s new minimum wage will be $10.00 per hour effective January 1, 2017.  Thereafter, the minimum wage will be raised to $10.50 effective January 1, 2018, $11.00 effective January 1, 2019, and $12.00 per hour effective January 1, 2021.  Beginning in 2021, the minimum wage will continue to be adjusted annually based on Arizona’s cost of living.  Employers with employees who customarily and regularly receive tips as part of their income may continue to pay employees $3.00 less than the minimum wage in accordance with Arizona’s minimum wage act if the employer can prove the employee is earning at or beyond the minimum wage after tips are counted.

Arizona’s passing of Proposition 206 continued a national trend of answering demands for paid sick time and increasing the minimum wage.  Maine and Colorado also agreed to raise the minimum wage, while Washington voters approved of both a minimum wage increase and to provide paid sick leave for employees in similar fashion to Arizona’s measure.

Arizona employers are encouraged to reach out to local employment attorneys for additional guidance or as questions may arise.

Cook County, Illinois Increases Minimum Wage

cook county illinois minimum wageEffective July 1, 2017, employers in Cook County, Illinois, will be required to pay a higher minimum wage that will continue to increase every year thereafter. On October 26, 2016, the Cook County Board voted to gradually increase the minimum wage to $13 per hour by July of 2020. This is similar to the City of Chicago’s minimum wage increase, which gradually raises the minimum wage to $13 per hour by 2019. The new law applies to the all of Cook County, including unincorporated areas. However, home-rule towns can vote to opt out of the increase.

The minimum wage will first increase from $8.25 to $10 per hour on July 1, 2017. It will subsequently increase $1 per year until reaching $13 an hour in 2020. Future annual increases will be tied to the rate of inflation, not to exceed 2.5%. Tipped workers who make $4.95 under Illinois law will not see a wage increase until July 1, 2018, and these wage increases will be tied to the rate of inflation, not to exceed 2.5%.

Employers in Cook County should prepare for payroll increases beginning July 2017 and continuing every year thereafter.

Employers Must Continually Navigate a Minimum Wage Patchwork Across America

minimum wagePerhaps in response to protests brought by employees and their advocates in recent years, states, counties, and cities across America have been increasing their minimum wage in piecemeal fashion. Few employers are fortunate enough to need worry about only one minimum wage—the federal minimum wage that is the floor below which employers may not go (unless an employer is not covered under the FLSA). Most large employers that operate in multiple states must now navigate a minimum-wage patchwork in which the hourly rate vaminimum wageries from state to state and, sometimes, between counties and cities.

Although the federal minimum wage is $7.25 per hour, 29 states and the District of Columbia have a minimum wage greater than the federal minimum wage. And those states are consistently increasing their minimum wage—New Jersey just passed legislation increasing its minimum wage from $8.38 per hour to $8.44 per hour, effective January 1, 2017, which is also when the Montana minimum wage will go from $8.05 to $8.15 per hour.

California is arguably the most difficult minimum-wage patchwork for employers to navigate. From a present minimum wage of $10 per hour, the California minimum wage will increase one dollar per hour each year until it reaches $15 per hour in 2022. But those increases also result in increasing the minimum salary that must be paid to employees who qualify for most overtime exemptions in California. Because most exempt employees in California must make at least twice the minimum wage on an annual basis, the current minimum salary for exempt employees who work for employers having more than 25 employees will increase from the present minimum of $41,600 per year to a minimum of $62,400 by 2022. (However, if the DOL’s rule goes into effect on December 1, 2016, requiring a new minimum salary of $47,476, then that will be the new floor below which employers may not pay their employees on a salary basis.)

In addition to minimum-wage increases on a statewide level, numerous California cities and counties have passed ordinances increasing their own minimum wages. From San Diego to Berkeley, the minimum wage in many cities has increased quicker than the state minimum wage. California’s minimum wage is presently $10.00 per hour. Employers in Santa Clara and Palo Alto, however, must pay their employees at least $11.00 per hour. Employees across the bay in Oakland must be paid at least $12.25 per hour. San Diego employers must pay their employees $10.50 per hour, as do Santa Monica employers that employ more than 25 employees.

California cities are not the only ones that have increased their minimum wage faster than their resident states. Employers in Albuquerque have had an $8.50 minimum wage since 2013, greater than the $7.50 required under New Mexico law. Similarly, Chicago has a $10.50 minimum wage, although Illinois mandates only $8.25. Seattle businesses that employ less than 500 persons must pay their employees $12.00 per hour, but Washington has a minimum wage of only $9.47.

©2016 Epstein Becker & Green, P.C. All rights reserved.