From joint employment to overtime, worker status to minimum wage, and compensable time to wage payment requirements, the actions of the U.S. Supreme Court and state supreme courts in the first half of 2018 have affected payroll and left us wondering what other developments may lie ahead.
Here are some highlights from the courts’ rulings this year.
U.S. Supreme Court
The high court is scheduled to recess by the end of June but 20 rulings remain to be issued. However, if it were to recess today, the court would have altered the payroll landscape through its opinions and lower-court rulings that it let stand.
Whether a business is liable as a joint employer under the Fair Labor Standards Act was the heart of a case that the Supreme Court declined to consider Jan. 8. By not reviewing the issue, the court allowed federal appeals courts to apply different multifactor tests to determine when related companies may be held jointly liable for wage and hour violations, including a six-factor economic-reality test used by the Fourth Circuit and an eight-factor economic dependence test used by the Eleventh Circuit. The case is DirecTV LLC v. Hall, U.S., No. 16-01449, cert. denied 1/8/18.
Regarding collective and class actions, the Supreme Court ruled 5-4 in three consolidated cases that companies may require workers to pursue legal claims against their employers through arbitration, rather than go to court or join in class lawsuits or grievances. Arbitration agreements that cover employment-related disputes often are used by employees to reduce the number of class and collective actions in labor and employment law. The cases are Epic Systems Corp. v. Lewis, No. 16-285;Ernst & Young LLP v. Morris, No. 16-300; and NLRB v. Murphy Oil USA Inc., No. 16-307; 5/21/18.
Automobile service advisers are exempt from overtime, the Supreme Court decided in 5-4 vote, in which the court ruled that because car-dealership service advisers are primarily engaged in servicing automobiles, they are exempt from FLSA overtime pay requirements. The court also rejected the principle that FLSA exemptions should be narrowly construed. The ruling resolved a circuit court split in which the Fourth and Fifth circuit courts excluded service advisers from overtime pay. The case is Encino Motorcars LLC, v. Navarro, U.S., No. 16-1362, 4/2/18.
The Supreme Court denied the review of a case that concerned the compensability of short breaks. The court let stand a federal appeals court’s ruling that workers must be paid for rest periods of up to 20 minutes under the FLSA. The case is Am. Future Sys., Inc. v. Acosta, U.S., No. 17-995, review denied 6/11/18.
Among the cases not set for argument until the court’s next term is a case regarding whether a railroad’s payment to an employee for time lost from work is subject to employment taxes under the Railroad Retirement Tax Act (BNSF Railway Company v. Loos, No. 17-1042) and two cases regarding arbitration agreements (New Prime Inc. v. Oliveira, No. 17-430; Lams Plus Inc. v. Varela, No. 17-988).
State Supreme Courts
Arkansas minimum-wage measures were among the ballot initiatives that were certified for circulation by Arkansas Attorney General Leslie Rutledge (R) after the Arkansas Supreme Court order May 23 that Rutledge certify proposed ballot initiatives or propose language that would be more acceptable. The ruling followed a lawsuit that claimed Rutledge refused more than 60 proposed amendments despite the statutory requirement that she certify or offer corrections to the proposals. The case is Couch v. Rutledge, Ark., CV-18-432, 5/23/18.
In California, the overtime value of flat-sum bonuses earned by employees must be calculated based on actual nonovertime hours worked, not the number of nonovertime hours available to an employee in the pay period, the California Supreme Court ruled. To determine the per-hour value of the bonus, the flat-sum bonus should be factored into an employee’s regular rate of pay by dividing the bonus amount by the total number of nonovertime hours worked within a pay period and by using 1.5, not 0.5, as the multiplier to determine the employee’s overtime pay rate, it said. The case is Alvarado v. Dart Container Corp. of Calif., Calif., No. S232607, 3/5/18.
A worker is to be considered an employee under California wage orders unless the worker is free from the employer's control and direction, performs work outside the usual course of the employer's business, and is customarily engaged in an independently established trade, occupation, or business of the same nature as that performed for the employer, the state supreme court said in a ruling that expands the definition of employee under California wage orders and requires employers to prove that independent contractors are properly classified. The case is Dynamex Operations W. v. Super. Ct., Calif., No. S222732, 4/30/18.
How to square the FLSA de minimis doctrine that allows small amounts of off-the-clock work to go unpaid with a state law requiring employees to be paid for all hours worked is the question posed by a case pending before the California Supreme Court. Oral arguments were held May 1, and a decision this summer. The case is Troester v. Starbucks Corp., Calif., No. S234969, oral arguments 5/1/18.
The California Supreme Court also is considering whether time spent on an employer's premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work for personal convenience by employees is compensable as hours worked within the meaning of California Industrial Welfare Commission Wage Order No. 7. The case is Frlekin v. Apple Inc., Calif., S243805, reply brief filed 6/8/18.
Under the Colorado Wage Claim Act, the statute of limitations for a terminated employee to bring a claim for wages owed and payable is limited to the two years, or three years for willful violations, immediately preceding termination, the state supreme court ruled. Wage claims that expired under the state's two year statute of limitation, or three years for willful violations, cannot be revived, or cannot begin to re-accrue, after termination, it said. The case is Hernandez v. Ray Domenico Farms Inc., 2018 BL 73089, Calif., No. 17SA77, 3/5/18.
Under the Massachusetts Wage Act, payment for accrued, unused sick time does not count as a form of wages that must be paid to workers upon separation from employment, the state supreme court recently ruled. The case is Tze-Kit Mui v. Mass. Port Auth., 478 Mass. 710, 1/29/18.
Nevada employers may pay the lower of the state’s two minimum wages if they offer health insurance that costs at least an extra dollar an hour in wages and that costs employees no more than 10 percent of their gross taxable income from the employer, the Nevada Supreme Court ruled. Employers that pay the lower hourly minimum wage have the burden of proving that it provided the employee with a health-insurance benefit “equal to a value of at least an additional dollar per hour in wages,” and if they cannot do so, must pay the employee the higher minimum wage, the court said. The case is MDC Rests. LLC v. Eighth Judicial Dist. Court, Nev., No. 71289, court opinion 5/31/18.
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