Department of Labor Modifies Stance on Obama Era 80/20 Rule for Tipped Employees

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by Robert P. Rudolph

On November 8, 2018 the Department of Labor (“DOL”) issued Opinion Letter FLSA 2018-27, which rolls back the Obama-era’s enforcement of what is commonly referred to as the “80/20 Rule.” Many states allow an employer to pay a lower tipped rate to tipped service employees, such as waiters and bussers. For example, in Massachusetts, the basic minimum wage is currently $12 per hour, but tipped employees can be paid a lower service rate of $4.35 per hour, so long as the sum of the tipped rate and the tips received by the employee equal or exceed the basic minimum wage. In other words, employers receive a “tip credit” of $7.65 per hour.

The 80/20 Rule, contained in section 30d00(f) of the DOL’s internal Field Operations Handbook, acted as a limit on the use of the lower tipped rate. The 80/20 Rule stated that no tip credit could be taken on “related duties” where a tipped employee spends more than 20 percent of working time performing duties related to the tipped occupation, but not directly producing tips, such as cleaning and setting tables, rolling silverware, making coffee, etc.

The Opinion Letter recognizes that the 80/20 Rule has resulted in confusion and that it would be difficult, if not impossible, for employers to account for the exact amount of time each employee spends on every “related” task performed. The Opinion Letter significantly retracts the 80/20 Rule, stating that going forward, “[w]e do not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct consumer-service duties…” In other words, as long as the duties are performed contemporaneously with duties involving direct service to customers or for a reasonable time immediately before or after such direct-service duties, it does not matter whether a service employee spends more than 20 percent of working time performing related, non-tipped work. This should help curtail inconsistent application of the 80/20 rule, which has previously resulted in litigation throughout the country.

Notwithstanding the foregoing, employers would be ill advised to change their compensation structures based solely on the Opinion Letter. Instead, employers should wait and see how the change plays out in the courts and the legislature, both state and federal. Massachusetts law provides a prevailing employee in a wage claim with a statutory entitlement to three times single damages and attorney’s fees. All employers, whether or not using the tipped rate, must be familiar with and insist on strict compliance with the Massachusetts Wage Act.

Read the November 8, 2018 Opinion Letter FLSA 2018-27.

What? I Can’t Talk to My Own Employees? A Cautionary Class Action Tale

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by Adam Shafran

Class action wage and hour and other similar employment class action lawsuits are more prevalent than ever, particularly in Massachusetts, which has some of the strongest pro-employee laws in the country. A decision from the Massachusetts Business Litigation Session demonstrates that employers faced with a class action lawsuit must be careful how and when they communicate with their employees.

In this case, a restaurant owner met personally with current and former employees to try to resolve unpaid wage claims and provided each employee with a disclosure letter about the pending class action lawsuit. When the plaintiff’s attorney learned about this, he filed a motion to prohibit the owner from engaging in such communications. The Massachusetts Superior Court agreed, ruling that a restaurant chain could be prohibited from communicating with its current and former employees about resolving unpaid wage claims against the company while a class action lawsuit is pending.

Critically, the judge found serious problems with the method, manner and content of the communication. First, the judge determined the disclosure letter provided to each employee was disingenuous because it stated the plaintiff was “not likely to win at trial.” Second, the judge found the disclosure letter contained release language that was substantially overbroad inasmuch as any employee who signed the letter would release the restaurant from not only wage and hour claims, but from any and all claims of any nature the employee had or may have had. Finally, the judge determined it was inappropriate for the restaurant owner to present the disclosure letter in person to each employee because employees may have felt pressured to sign the letter on the spot so as not to jeopardize their employment.

So what lessons can be learned? If your company faces a class action employment lawsuit, any proposed communications with employees to resolve claims should likely first be presented to the court to obtain the judge’s approval. To the extent any such communication contains a release, the release should be appropriately tailored to the dispute in question. For example, if the employer is being sued for a tip violation, the release should not also release discrimination claims. Finally, all communications regarding an existing class action lawsuit should be sent to employees via certified mail unless there are compelling reasons not to do so.

Of course, the first step every employer should take is to have their employment policies and practices reviewed so that there is no class action exposure, but in the event a class action arises, Rudolph Friedmann LLP can ensure the company is properly communicating with its employees.

Watch Out for Self-Extending Leases – Acts Can Satisfy Notice Provision

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by George Georgountzos

A lease functions as the basis of the contractual agreement between the landlord and tenant, outlining the parties’ obligations to each other. When disputes arise, parties, counsel and courts look to the lease as the starting point in determining what the parties agreed to and whether there has been a breach. Peculiar or extraordinary provisions in leases are generally upheld where both parties are sophisticated and understand the expectations from the outset.

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Does This Ad Violate Massachusetts Law?

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by Amy B. Welch

The ABC Store in Anytown is hiring!! Immediate opening for part-time mother’s hours, M-F 8:30am-2:30pm with some Saturdays (as needed). Individual should have good customer service skills, some computer skills, ability to multi-task and handle packages up to 30-40 lbs. Call John Doe at 781-224-2500 or come in to the store @ 15 Lincoln St. Thank you!

Recently, the above ad for part-time help sparked a brouhaha on a local Facebook page. A person took offense to the term “mother’s hours” sparking a debate over whether the term was discriminatory or political correctness had run amok. The aggrieved party claimed that “it sounds discriminatory as in, no consideration for full-time hours for a mother, no seniors, etc. We should be beyond this.”

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Residential Leases in Post-Legal Marijuana Era

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by George Georgountzos

Landlords who lease residential units face new challenges in dealing with legalized marijuana use. Legal use of medicinal marijuana has been around for a while and Massachusetts courts have addressed issues about offering reasonable accommodations for individuals who are prescribed marijuana under a doctor’s care. Now that Massachusetts has legalized recreational use of marijuana, landlords would be best served by addressing the new reality in their leases to minimize nuisance claims and limit the potential harm that could come from tenants growing cannabis in their units.

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