The Oakland Raiders cheerleading squad, the Raiderettes, recently obtained a new contract from the Raiders which will bump their pay to a whopping $9 an hour. The pay increase is likely the result of a class-action lawsuit that was filed by a Raiderette against the Raiders alleging that they were not paid at least minimum wage in violation of California wage and hours laws. Under an agreement between the cheerleaders and the team, the cheerleaders were paid $125 for each home game, which totaled $1,250 for the entire season. The lead Plaintiff, Lacy T., alleged that when all of the hours she spent attending mandatory events and rehearsals were factored into her work hours, her hourly pay only amounted to $5.
Cheerleaders have filed similar wage and hour claims against the Buffalo Bills, Cincinnati Bengals, Tampa Bay Buccaneers and New York Jets. In some of the cases, the cheerleaders allege that they were forced to sign contracts misclassifying them as independent contractors.
In Missouri, former Giants Minor League pitcher turned lawyer, Garrett Broshuis, filed a wage and hour lawsuit against the MLB on behalf of players for each of the 30 major league teams. The suit alleges that minor league players are employees who should be entitled to the Fair Labor Standards Act (“FLSA”) protections. Therefore, all of the time spent in spring training and instructional league should be considered a part of their work hours. If all of that time is considered, players’ paltry wages fall below the minimum wage.
These cases should serve as a reminder that wage and hour issues exist in every industry in all shapes and sizes. All employers must ensure that they are classifying their employees properly and paying them fairly. Here are a just few basics that every employer should be aware of to be compliant:
- Independent Contractor Classification: A common misconception is that a written independent contractor agreement by itself is sufficient to establish an independent contractor relationship. In fact, while a written contract is important to establish an independent contractor relationship, there are many other factors that come into play in the eyes of the IRS and state agencies. Other factors include the amount of control the company has over what and how the worker does his or her job; whether expenses are reimbursed; whether tools and equipment are provided by the company; and whether benefits are provided to the worker, such as insurance and vacation, to name a few. In simple terms, to have a true independent contractor relationship, the company can control the results of the worker, but not the method of how the worker performs his work to achieve the results.
- Minimum Wage: Under FLSA, companies must pay covered non-exempt employees no less than $7.25 an hour. Many state minimum wages are higher. In situations where both the federal and state minimum wag law applies, the employee gets the benefit of the higher wage. Rate of pay is calculated by dividing the employee’s pay by the number of hours worked during a pay period. The resulting amount must exceed the minimum wage. Many violations occur because employers do not pay employees for all of the time that the law considers to be compensable time. The overriding principle is that work suffered or permitted to be performed is compensable time, meaning the time worked must be paid by the employer. The DOL provides the following example: “An employee may voluntarily continue to work at the end of the shift to finish an assigned task or to correct errors. The reason is immaterial. The hours are work time and are compensable.” See Wage and Hour Fact Sheet #22.
- Exemptions from Minimum Wage: Under Federal law and many state laws, certain types of employees are exempt from minimum wage requirements. These include administrative, professional, executive, computer and outside sales employees. It is important to understand that merely labeling an employee a manager or paying an employee a salary is not enough to establish an exemption. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. In March, President Obama signed a Presidential Memorandum directing the Department of Labor to update the regulations defining which white collar workers are eligible to receive pay for hours worked over 40 in a workweek. Given the Administration’s focus on this issue, employers should audit their classifications and keep up to date with any changes that may be imposed in the future regarding exemptions under the Federal and State laws.
- Overtime: Non-exempt employees must be paid one and a half times his or her regular rate of pay for every hour over 40 hours worked per week. Paying straight time for hours worked over 40 is not permissible. If an employer knows or has reason to know that an employee is working overtime, the overtime hours must be paid – even if the employer has a policy that requires overtime to be pre-approved.
- Tips: If an employee receives tips, he or she may be paid less than the minimum wage, but the hourly wage plus tips must add up to the minimum wage requirement. To use the tip credit an employer must provide oral or written notice to the tipped employees about the following information: (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 provision.
Violating the FLSA or equivalent state laws can be costly and unforgiving. Employers found in violation of these laws can be liable for extraordinary amounts even if they did not intend to pay employees improperly. By focusing attention on compliance, an employer can avoid incurring a back pay determination that can impact its bottom line. A good game plan would include implementing policies that reflect a commitment to wage and hour compliance and ensuring that the policies are being enforced consistently.
Kenneth Winkler, a shareholder at Berman Fink Van Horn, helps employers navigate the employment laws and regulations that govern the workplace.