Where Tips End and Wages Begin

One year ago, this blog featured a post that outlined various reasons why the restaurant industry’s use of tips in lieu of guaranteed wages had come to provoke, in the author’s words, “a firestorm of criticism”: that reliance on tips as a significant component of server take-home pay 1) destined many servers to earning a sub-minimum wage; 2) encouraged female servers to tolerate sexual harassment by their customers; and 3) resulted in pay discrimination unrelated to the quality of servers’ work, a consequence of customer biases and their impacts on the amounts tipped.

Since the post’s publication, this firestorm has continued unabated. In fact, Uber even pointed to customer bias as a reason not to add a tipping function to its ride-sharing app, as its competitor Lyft has done. Moreover, recent modeling by FiveThirtyEight illustrates the volatility of tip-based incomes in the restaurant industry, as well as divisions between different classes of restaurants vis-à-vis the tipped amounts that their servers typically earn, which further underscores the question whether tipping can serve as a reliable substitute for set pay.

In this vein, a recent opinion out of the U.S. Court of Appeals for the Tenth Circuit sheds new light on the shortcomings of tipping as a reliable form of compensation, highlighting the dangers posed to employees by the liminal space between “tips” and “wages” under the Fair Labor Standards Act (FLSA).

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Today’s News & Commentary — February 20, 2017

A former Uber engineer, Susan Fowler Rigetti, penned a brave blog post yesterday detailing her repeated sexist treatment while working for the ride-hailing company. She writes about being harassed; how she and other women engineers were discriminated against; and how Uber’s management and human resources were not just unresponsive, but actively fought back against her. The New York Times and Wall Street Journal report how, later yesterday, Uber CEO Travis Kalanick announced that the company would be launching an investigation into the allegations.

In the Washington Post, Jared Bernstein reminds us why the Department of Labor is so important in today’s times. Specifically, Bernstein talks about the “fissured workplace,” the term coined by David Weil to describe an increasing distance between employers and workers due to franchising, subcontracting, and outsourcing. This reality led the Department of Labor’s Wage and Hour Division—which was run by Weil during the Obama Administration—to be more proactive about monitoring FLSA violations. Furthermore, such a “fissuring” places renewed importance on divisions within the department like OSHA.

Acquisitions and sales are adding to worker tensions overseas. McDonald’s may sell its Hong Kong and China operations to a large franchisee, which the Hong Kong Federation of Trade Unions warns may affect worker pay. Currently most workers earn just above the current minimum wage in Hong Kong—roughly $4.20 per hour. In the UK, General Motors may sell their Vauxhall business to the French car company PSA, according to Reuters. The purchase is being influenced by “overcapacity at existing sites, Britain’s move to leave the European Union and pension liabilities,” prompting talks with trade unions.

Today’s News & Commentary — May 24, 2016

Nowadays, you can order a pizza by tweeting an emoji and have it delivered to you in a car equipped with a built-in pizza warmer. But technology hasn’t just changed the way that pizza arrives on your doorstep; apparently, it has changed the way that employers underpay workers as well. The New York Times reports that New York Attorney General Eric Schneiderman has filed a lawsuit against Domino’s Pizza alleging that the computer system it provides its franchisees “systematically undercounted hours worked by employees, shortchanging them hundreds of thousands of dollars.” The suit comes on the heels of a number of recent legal victories against Domino’s franchisees in the Empire State, but differs from those actions in that it targets the franchiser for “forcing franchisees to use a computer accounting system even though it was aware it was flawed.” In fact, Schneiderman claims, “Domino’s corporate executives knew about the violations, denied responsibility and failed to take action.” Accordingly, Schneiderman promises to “prove that the Domino’s corporate franchiser is legally responsible for rampant wage theft occurring at its stores.” Exactly how rampant is the problem? According to Schneiderman’s office, “78 percent of franchisees listed instances of subminimum wages, and 86 percent . . . listed instances of unlawfully low overtime rates.”

As the recent dust-up over SEIU’s proposed agreement with Airbnb suggests, the growing gig economy has forced a bit of an existential crisis upon organized labor. Writing in Fast Company, Sarah Kessler takes a closer look at how unions are responding to rapidly advancing technology and its spiraling effects on the economy. On the one hand, says SEIU president Mary Kay Henry, “technology gives [unions] a leg up in being able to connect people to each other and activate them.” Some unions have also expressed willingness to organize gig workers, even if the shape of that organization does not fit the contours of a traditional union. On the other hand, however, “[e]ncouraging on-demand companies to rely on a workforce of independent contractors who lack the rights and protections of employees” may be “bad public policy.” That’s why the AFL-CIO — of which SEIU is no longer a part — continues to insist that “working people in the gig economy share a single common designation: employees.”

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Tyson Foods v. Bouaphakeo: Not All Representative Evidence is Made Equal

In Tyson Foods v.  Bouaphakeo, decided on March 22nd, the Supreme Court held favorably for thousands of workers in an opinion that limits the sweeping Wal-Mart Stores v.  Dukes decision of 2011.  As noted recently on this blog, courts have become increasingly hostile to collective action, but this case, along with Campbell-Ewold Company v.  Gomez, stand out against the modern trend.  This post will examine the differences between Wal-Mart and Tyson and explain why the Court was correct in Tyson even given the binding effect of Wal-Mart.

Tyson Recap

The plaintiffs in Tyson, 3,334 workers in the kill, cut and retrim departments of an Iowa meat processing facility, won $2.9 million in damages following a jury trial for violations of the Fair Labor Standards Act and the Iowa Wage Payment Collection Law; their primary claim was that they should have received overtime pay for time spent donning and doffing the protective gear required to carry out their jobs.  Tyson compensated some, but not all workers, for time spent donning and doffing this gear, but did not keep track of how long it took for each worker or department.

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Today’s News and Commentary — March 1, 2016

Labor unions have gone digital…media, that is.  The New York Times reports that “Gawker Media and the union that represents its employees announced on Monday that they had reached an agreement on a labor contract, the first designed and negotiated specifically for a digital media company.”  Gawker workers are represented by the Writers Guild of America, East and voted to join the union last year.  The agreement sets wages, gives workers editorial control, and ensures salary increases and severance, but leaves workers as at-will.  Voting on the agreement will take place this week.

French labor law won’t be changing so quickly after all.  Despite earlier reports suggesting a proposal to revamp laws might have been under consideration, Bloomberg notes that “President Francois Hollande held off presenting his proposals to revamp French labor law after the nation’s main unions all opposed the plan.”  The proposals would eliminate France’s 35 hour work week and give businesses more latitude to increase working time and fire workers with limited severance.

The Chicago Teachers Union is moving closer to striking as soon as April 1.  According to the Chicago Sun-Times, CTU Vice President Jesse Sharkley said strike preparations would proceed “if Chicago Public Schools follows through on its threat to unilaterally cancel the 7 percent pension pickup it has made for decades.”  Chicago teachers have been working without a union contract since June.

You go to B&H…for discrimination?  The New York Times reports that the U.S. Department of Labor filed suit against New York electronics retailer B&H “for hiring only Hispanic men into entry-level jobs in a Brooklyn warehouse and then subjecting them to harassment and unsanitary conditions.  The company was so unlikely to hire women to work in the warehouse that it did not have a separate restroom for them, according to the suit.”  The suit marks the second time in nine years B&H has been sued by the government for alleged discrimination, and the company came under fire for discrimination during a unionization campaign last year.

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Engaged in the “Practice of Law” – The Future of Contract Attorneys under the FLSA

Looking to save costs on large-scale document review projects, law firms often turn to “contract attorneys” to handle the grunt-work.  These contract attorneys are licensed attorneys, hired on a temporary basis, usually through staffing agencies, and their contracts run for the length of a project.  Despite often working in excess of 40 hours per week, law firms maintain that contract attorneys are not entitled to time and a half for overtime pay under the Fair Labor Standards Act (“FLSA”) since they are licensed attorneys, considered to be “engaged in the practice of law.”

In two recent cases, Lola v. Skadden, Arps, Slate, Meagher & Flom and Henig v. Quinn Emanuel Urquhart & Sullivan, contract attorneys challenged their designation as exempt employees under the FLSA.  In both cases, the plaintiffs claimed that the document review they conducted was so menial and clerical that they were not actually using their law degrees or engaged in the “practice of law.”  These cases have attracted a significant amount of attention, leading to questions about the manner in which law firms use and pay contract attorneys.

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Is Uber Wagging the Dog With Its Moonlighting Drivers?

There is a math problem with Uber’s most powerful argument for classifying its drivers as independent contractors, not employees.  That argument emphasizes how weakly attached to Uber most drivers are, as evidenced by how many drivers work very few hours per week.  Uber CEO Travis Kalanick recently defended the company’s labor practices by citing company data that over half of all its drivers worked for Uber under 9 hours per week.  The math problem is that this argument treats all drivers as equally important to Uber’s business, when in fact a small proportion of drivers are doing most of Uber’s work.  Uber wants to direct attention away from the bulk of its business (the dog) and onto the moonlighting outliers (the tail.)

Uber presents driving as a “secondary” gig that supplements earnings from other jobs or from other household members.  The news release accompanying its latest driver survey highlights that “more people are using Uber on the side” and emphasizes how many women, parents, and students drive for Uber.  This framing is familiar from debates over the minimum wage.  There, supporters routinely emphasize the prevalence of “breadwinners” affected.  Critics invoke teenagers and married women working part-time, summoning a long history of devaluing women’s economic contributions.  (See here for an alternative understanding of the minimum wage divorced from household income.)

Public policy relevance aside, the prevalence of driving “on the side” also supports Uber’s legal argument against classifying its drivers as employees.  Moonlighting drivers are less economically dependent on Uber than those who drive full-time, at least if part-time status is a matter of choice.  That assessment, and that assumption, drives the prominent recent proposal by Seth Harris and Alan Krueger for a new “independent worker” category for gig workers who, they argue, fit poorly into employee status.  Even courts and commentators who disagree with their conclusion acknowledge that low hours and intermittent driving weigh against employee status under current law; countervailing considerations may just be more important on balance.

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