New Jersey Employment Lawyer Blog

Articles Posted in Wage & Hour Law

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Restaurant employee tired from working overtimeThe Second Circuit Court of Appeals recently ruled that the parties to a lawsuit cannot agree to dismiss a case under the Fair Labor Standards Act (“FLSA”) as part of a settlement unless they have the approval of a Judge or the United States Department of Labor (“DOL”). The FLSA is a federal wage and hour law which establishes minimum wage and overtime requires.

Dorian Cheeks worked as a server for Freeport Pancake House, Inc. and W.P.S. Industries, Inc. He filed a lawsuit in the Eastern District of New York against both companies in which he asserted claims under the FLSA and New York Labor Law. He is seeking unpaid overtime pay and liquidated (double) damages, as well as attorneys’ fees. He also alleges that the Pancake House demoted him and eventually fired him because he objected about the company’s failure to properly pay overtime to him and its other employees, and is seeking damages for his past and future lost wages.

Mr. Cheeks and the Pancake House eventually agreed to settle the case. Accordingly, they filed a stipulation with the court seeking to have the case dismissed with prejudice. However, the court refused to dismiss the case. Instead, it directed the parties to file a copy of their settlement agreement as part of the public record, and to explain why they believe the settlement is “fair and reasonable.” The Court did so because the FLSA prohibits employees from waiving their rights under it unless their settlement agreement either was supervised by the DOL or approved by a court.

Despite the court’s instruction, the parties did not file a copy of their settlement agreement, presumably because, like most settlements in employment law cases, they agreed to keep the terms confidential. Instead, they asked the court to certify a question to the Second Circuit, namely whether they had the right to agree to dismiss their case without needing the court’s approval. The district court did so, and the Second Circuit agreed to hear the appeal.

On August 7, 2015, the Second Circuit concluded that the parties’ attempt to dismiss the case was improper. In essence, it found they were trying to circumvent the requirement that either a court or the DOL approve settlements of FLSA claims. Therefore, in Cheeks v. Freeport Pancake House, Inc., it ruled that parties could not voluntarily dismiss FLSA cases.

The appellate court acknowledged its ruling is likely to make it more difficult for parties to amicably resolve FLSA cases. It noted that many such cases are too small to warrant employees filing lawsuits or even administrative actions with the DOL, and many employers cannot afford to engage in legal proceedings. However, it also explained that the FLSA’s requirement to obtain approval of any settlement in an FLSA case is intended to protect one of the primary purposes of the FLSA, namely “to prevent abuses by unscrupulous employers, and remedy the disparate bargaining power between employers and employees.” Accordingly, it remanded the case to the district court for further proceedings.

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Yesterday afternoon, New York States’ Fast Food Wage Board approved a set of three resolutions that recommend raising the minimum wage for employees who work for fast food chains to $15 per hour. This would be $6.25 more than New York’s current $8.75 minimum wage.

The Fast Food Wage Board was formed the past May, at the request of Governor Andrew M. Cuomo, to review wages in the fast-food industry.

Under the three resolutions, covered “Fast Food Establishments” include any business in New York State that serves food and drink (1) at which customers order and pay before they eat; (2) which provides “limited service,” which presumably means they offer limited or no table service; and (3) which are part of a chain that has at least 30 locations throughout the United States.

The resolutions are not yet law. They still need to be ordered by New York State’s acting State Labor Commissioner, Mario J. Musolino.  However, the expectation is that Mr. Musolino will do so soon.

The resolutions would apply to all employees of any Fast Food Establishment, expressly including employees whose jobs relate to “customer service, cooking, food or drink preparation, delivery, security, stocking supplies or equipment, cleaning, or routine maintenance.”

The proposed increase would be gradually phased in over time, which would happen more quickly in New York City than the rest of the state. Specifically, in New York City the minimum rate will increase to $10.50 by the end of this year; $12.00 by the end of next year; $13.50 by the end of 2017; and $15.00 by the end of 2018. In contrast, for the rest of the state the rate will increase to $9.75 by the end of this year; $10.75 by the end of 2016; $11.75 by the end of 2017; $12.75 by the end of 2018; $13.75 by the end of 2019; $14.50 by the end of 2020; and $15.00 by July 1, 2021.

In a statement announcing the resolutions yesterday, Governor Cuomo declared it to be “one of the really great days of [his] administration.” He indicated that “[y]ou cannot live and support a family on $18,000 per year in the state of New York, period. That’s why we have to raise the minimum wage.” He also vowed to work to increase the minimum wage for other workers, stating: “we will not stop until we reach true economic justice and we raise the minimum wage for every worker in every job in this state.”

A copy of the full text of the resolutions is available on the Fast Food Wage Board’s website.

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A recent decision by the Second Circuit Court of Appeals makes it more difficult for unpaid interns to successfully bring overtime and minimum wage claims under the Fair Labor Standards Act (“FLSA”) and New York State’s wage and hour law. The FLSA is a federal law that requires employers to pay certain employees at least the minimum wage, and time-and-a-half when they work more than 40 hours per week. The Second Circuit handles appeals from federal courts in New York, Connecticut and Vermont.

unpaid intern making photocopies for employerThe case was filed by Eric Glatt, Alexander Footman, Eden Antalik. Mr. Glatt and Mr. Footman worked for Fox Searchlight Pictures, Inc. in connection with the movie Black Swan, and Ms. Antalik worked for the company in another capacity. Their job duties varied, but included things like copying and scanning documents, taking lunch orders, making deliveries, hotel reservations and catering arrangements, and taking out the trash. They worked between 30 and 50 hours per week. Fox classified all three as interns and did not pay them at all. They sued, claiming Fox failed to pay them minimum wage and overtime in violation of the FLSA and New York State law.

The United States Department of Labor (“DOL”) has a longstanding guidance which sets a very high requirement before a company can treat someone as an unpaid intern without violating the FLSA. Under it, an employer must pay an intern unless all six of the following conditions are met:

  1. The internship . . . is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Most interns fail this test because, among other things, the work they perform provides an immediate advantage to the employer.

In Glatt v. Fox Searchlight Pictures, Inc., the Second Circuit rejected this test. Although it acknowledged some employers exploit unpaid interns by using them for free labor, it also noted that internship programs can be beneficial to the interns. With that in mind, it ruled that the proper test to determine whether the FLSA requires an employer to pay an intern is whether “the intern or the employer is the primary beneficiary of the relationship.”

The Second Circuit provided examples of some of the factors a court should consider when applying this new test. These factors include the extent to which:

  1. The intern and the employer both clearly understand there is no expectation of compensation;
  2. The internship provides training that is similar to what would be provided in an educational environment;
  3. The internship is tied to a formal education program by integrated coursework or academic credit;
  4. The internship corresponds to the academic calendar;
  5. The internship’s is limited to the period in which it provides the intern beneficial learning;
  6. The intern’s work complements, rather than displaces, the work of paid employees while providing the intern significant educational benefits; and
  7. The intern and the employer both understand that the intern is not entitled to a paid job at the conclusion of the internship.

The Court made it clear no one of those factors is determinative. It also instructed that Courts can consider other factors when determining which party is the primary beneficiary of the relationship. However, by making it a balancing test rather than six absolute requirements, it made it much easier employers to treat their workers as interns without violating the FLSA.

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The Second Circuit Court of Appeals recently held that the Fair Labor Standards Act (“FLSA”) prohibits employers from retaliating against employees who complain to their employer’s about a violation of the FLSA. The FLSA is a federal wage and hour law that, among other things, establishes minimum wage and overtime requirements. The Second Circuit handles federal appeals out of several states, including New York.

The case, Greathouse v. JHS Security Inc., reversed a 1993 Second Circuit ruling to the contrary.  Specifically, in Lambert v. Genesee Hospital the Second Circuit concluded that because the FLSA’s anti-retaliation provision prohibits employers from retaliating against employees who “filed” a complaint, it applies only protects employees who filed a written complaint with a government agency. The opinion in Greathouse expressly overrules Lambert.

Darnell Greathouse worked as a security guard for JHS Security. He made numerous oral complaints to his boss, Melvin Wilcox, because the company was late paying him and took illegal deductions from his salary. For example, in October 2011 Mr. Greathouse complained to Mr. Wilcox because the company had not paid him in several months. In response, Mr. Wilcox told him: “I’ll pay you when I feel like it.” Mr. Wilcox then pulled out a gun and pointed it toward Mr. Greathouse. Mr. Greathouse took this to mean he was fired.

JHS did not respond to Mr. Greathouse’s lawsuit. As a result, the United States District Court for the Southern District of New York entered a default judgment in Mr. Greathouse’s favor. After a proof hearing, the court awarded Mr. Greathouse more than $30,000, which included lost wages and overtime pay. However, relying on Lambert, it dismissed his retaliation claim.

On appeal, the Second Circuit relied heavily on a 2011 United States Supreme Court opinion, Kasten v. Saint-Gobain Performance Plastics Corp.   That case holds that the FLSA’s anti-retaliation provision applies to both oral and written complaints if the complaint is “sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.”

Kasten involved an employee who experienced retaliation after he complained to his supervisor that the company’s time clocks were in a location that prevented employees from getting paid for the time they spent changing into and out of their work clothes. The Supreme Court did not decide whether the FLSA protects employees who make internal complaints because the employer did not properly raise that issue on appeal. I discussed Kasten in a previous article: U.S. Supreme Court Rules FLSA Forbids Retaliation Against Employees Who Make Oral Complaints.

In addition to relying on Kasten, the Second Circuit noted that most other Court of Appeals that have considered the issue have concluded that the FLSA prohibits employers from retaliating against employees who make internal complaints about violations of the statute. The court also relied on the fact that the FLSA is supposed to be interpreted broadly to advance its remedial and humanitarian purposes.

Ultimately, the Second Circuit concluded that the FLSA’s anti-retaliation provision protects employees who complain to their employers about violations of the law if a reasonable employer would understand the employee was claiming that the employer violated the FLSA. Although the employee’s complaint does not have to be formal, there does have to be some degree of formality. For example, the protection from retaliation does not apply to employees who merely make passing comments about a violation of the FLSA. But the Second Circuit made it clear that employees do not have to file a complaint with a government agency to be protected by the FLSA’s anti-retaliation provision.

Accordingly, the Second Circuit remanded the case to the District Court so it can determine whether Mr. Greathouse’s complaint is protected under the FLSA.

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Beginning this month, East Orange, Irvington, Passaic and Paterson will join Newark and Jersey City in requiring employers to provide their workforce with paid sick leave. Montclair and Trenton will begin requiring covered employers to provide paid sick leave in March. The ordinances governing sick pay in these municipalities largely mirror Newark’s law that went into effect last year.

The ordinances governing sick leave are nearly identical. Eligible employees include those who work for at least 80 hours per year for an employer of 10 or more employees. Covered employers are required to provide employees with 40 hours of paid sick leave each calendar year. If an employer has fewer than 10 employees, it is required to provide 24 hours of paid sick time each calendar year. Employers of child care, home health care and food service workers, however, are required to provide 40 hours of paid sick leave even if such employers have less than 10 employees. Government employees, employees of New Jersey schools and members of construction unions are not covered by the various ordinances.

a mother and sick child in bed. flu. childhood diseases.In determining the number of employees for coverage, full time, part-time and temporary employees must be counted. Paid sick time is accrued one hour of sick time for every 30 hours actually worked, and employees can begin to use the paid sick time once they reach 90 days of employment. Unused paid sick leave that is not otherwise paid out to employees can be carried over to the following calendar year, but employees may only use 40 hours of paid sick time per year. Also, employees are not entitled to reimbursement of unused paid sick time upon the termination of employment.

Paid sick time can be used for an employee for his or her own or the employee’s care of family members involving:

  • Mental or physical illness, injury or health condition;
  • Medical diagnosis, care or treatment; or
  • Preventative care.

The following are included in the definition of a family member: children, parents, civil union partners, grandparents (or spouses, civil union partners or domestic partners of grandparents), spouses, domestic partners, grandchildren and siblings.

Paid sick time also can be used if the employers’ place of business is closed due to a public health emergency, or if an employee needs to care for a child whose school or day care is closed because of a public health emergency.

Employers may not interfere with or retaliate against employees for the exercise of their right to take paid sick leave. Additionally, employers can be fined for failures to comply with the paid sick leave ordinance.

There also is a notice requirement for employers. Employers are required to provide all employees and new employees upon hire with written notice of the paid sick leave policy, and are to display a poster outlining the paid sick leave policy as well. Also, the sick leave policy must be in English and any other primary language spoken by at least 10% of the employer’s workforce. The municipalities have not yet issued such notices and posters. As a result, in the meantime employers will need to draft a notice and poster to distribute to their employees.

In preparing such notices, employers will have to include the following information:

  • The employee’s right to paid sick time;
  • The accrual and the amount of paid sick time available to employees;
  • The terms of use under the paid sick leave ordinances;
  • The employee’s right to be free from retaliation; and
  • The employee’s right to file a complaint if sick leave is denied or if the employee is retaliated against.

As a result of these ordinances, employees who may not otherwise have been eligible for paid time off will now have some time available to address their own and their family member’s medical issues.

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The United States Supreme Court recently ruled that an employer is not required to pay its employees for the time they have to wait to go through security screening even though the employer requires the screening.

The employer, Integrity Staffing Solutions, Inc., provides warehouse employees to throughout the country.  Its employees package products and ship them on behalf of Amazon.  Integrity required the warehouse workers to pass through metal detectors at the end of each day before they could leave the warehouse.

Two employees, Jesse Busk and Laurie Castro, filed a class action wage and hour lawsuit against Integrity.   They claimed Integrity violated the Fair Labor Standards Act (“FLSA”), a federal law, because it did not pay them for the time they had to wait to pass through metal detectors at the end of every day.  The employees estimated they had to wait an average of 25 minutes per day, or nearly to 2 1/2 hours per week.

Employee Security ScreeningOvertime The trial court dismissed their case, ruling the employees were not entitled to be paid for this waiting time because it occurred after their work shifts were over and was not an “integral and indispensable” part of their jobs.  The employees appealed, and the United States Court of Appeals for the Ninth Circuit reversed.  It found this waiting time was compensable because it was, in fact, integral and indispensable to the employees’ job duties since it was necessary to prevent employee theft.

The United States Supreme Court agreed to take the case.  In Integrity Staffing Solutions, Inc. v. Busk, it explained that courts initially interpreted the FLSA to cover all of the time employees were “required to be on the employer’s premises, on duty or at a prescribed workplace.”  However, in 1947 Congress decided this definition was too broad.  As a result, it passed a new law, the Portal-to-Portal Act, which makes it clear that the FLSA does not require employers to pay employees for (1) their time traveling to and from work, or (2) activities that occur before or after the employee finishes performing his or her principal activity or activities for the employer.

The Supreme Court noted that it previously has ruled that an employee’s principal activities include duties that are “integral and indispensable” to the employee’s principal activities.  For example, it has held that showering and changing clothes can be integral and indispensable for employees who work with toxic chemicals because they cannot safely perform their jobs without doing so.  Likewise, sharpening knives can be integral and indispensable to meatpackers because dull knives slow production, have a negative impact on the appearance of the meat and can lead to accidents.  However, it also has ruled that waiting to put on protective gear is not compensable time for workers at a poultry plan because it is “two steps removed” from their jobs working on an assembly line.

Applying these principles, the Court ruled that the warehouse workers were not entitled to be paid for waiting to undergo the security screenings.  It explained that since the employees were hired to package and ship products rather than for the purpose of undergoing security screenings, the screenings are not one of their principal activities.  It further indicated that the screenings are not integral or indispensable to their principal activities because it is possible to package and ship products without undergoing security screenings.

The Court indicated that it does not matter that Integrity required the security screenings since the employees could have completed their work even if Integrity had did not require any screening.  Similarly, it found it irrelevant that the company could have reduced the time the employees had to wait before they were screened since this waiting time is not necessary to accomplish the work the employees were hired to perform.  Accordingly, it reversed the Ninth Circuit and dismissed the case.

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Last month, a judge in the United States District Court for the District of New Jersey ruled that an employee who files a wage and hour claim with the New Jersey Department of Labor (“NJDOL”) can be protected from retaliation under the Fair Labor Standards Act (“FLSA”) even if her original claim did not assert that her employer violated the FLSA.

Veronica Reilly worked for Quick Care Medical, P.C., as an office manager. She filed a claim seeking to recover unpaid vacation time and overtime pay with the NJDOL. Specifically, she claimed the company failed to pay her $673.20 to which she was entitled when she used a week of her accrued vacation time. She also claimed she was improperly denied $168.40 in overtime pay. She brought her claims under two state laws, the New Jersey Wage Collection Statute and the Wage Payment Law Statute. Ms. Reilly won both of her claims, and the NJDOL ordered Quick Care to pay the full $841.60 she sought in vacation and overtime pay.

Office ManagerAccording to Ms. Reilly, when she returned to work on the day of her hearing at the NJDOL, her boss, Dr. Neerja Misra, reprimanded her for failing to tell the company she was going to be late for work that day. Dr. Misra apparently told Ms. Reilly not to come to work for the next three days, and then fired Ms. Reilly when she returned to work on the fourth day after her hearing.

Ms. Reilly filed a lawsuit alleging that both Quick Care and Dr. Misra violated the FLSA by firing her because she filed her claim with the NJDOL. The FLSA is a federal law which, among other things, regulates employee compensation and overtime pay. It also prevents an employer from firing an employee because he or she makes a complaint related to one of the FLSA’s provisions.

Quick Care and Dr. Misra asked the court to dismiss Ms. Reilly’s claim, arguing the FLSA’s anti-retaliation provision did not apply because she filed her original claim under New Jersey law rather than under the FLSA. However, the court disagreed. It explained that the FLSA does not indicate it protects an employee only if he or she files a claim that expressly refers to the FLSA by name. Rather, it protects employees who bring claims “related” to the statute. The court found this means the claim must relate to an issue covered by the FLSA, such as a claim about wages or overtime pay. It noted that numerous other courts have reached the same conclusion that the FLSA prohibits employers from retaliating against employees because they file wage and hour claims in state agencies. Thus, in Reilly v. Quick Care Medical it ruled that Ms. Reilly’s complaint to the NJDOL is covered by the FLSA’s anti-retaliation provision. Accordingly, it permitted her to continue to pursue her case.

For more information about retaliation claims under the FLSA you might want to read our previous article: U.S. Supreme Court Rules FLSA Forbids Retaliation Against Employees Who Make Oral Complaints.

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The Third Circuit Court of Appeals recently reinstated an employee’s class action overtime pay lawsuit under Fair Labor Standards Act (FLSA) and the New Jersey Wage and Hour Law (NJWHL).  In doing so it recognized successor companies can be liable for their predecessors’ overtime violations, and individual owners and supervisors can be held personally liable under both of those laws.

Real estate concept - business-man signs contract behind househoPatricia Thompson was hired by Security Atlantic Mortgage Company as a mortgage underwriter in June 2009.  Security Atlantic quickly assigned her to provide training at a related company, Real Estate Mortgage Network (REMN).  In February 2010, Security Atlantic stopped doing business and Ms. Thompson began working directly for REMN.  Otherwise, her job and the business remained essentially the same.

Ms. Thompson claims Security Atlantic and REMN both failed to pay her and other mortgage underwriters time-and-a-half when they worked more than 40 hours per week, in violation of both the FLSA and the NJWHL.  Specifically, she alleges mortgage underwriters worked through lunch and at home to complete their assignments on time, but were not paid overtime because the companies misclassified them as exempt employees.

Ms. Thompson sued Security Atlantic, REMN, and two co-owners of Security Atlantic, Samuel Lamparello and Noel Chapman.  However, the United States District Court for the District of New Jersey dismissed the entire case. 

In Thompson v. Real Estate Mortgage Network the Third Circuit reversed, ruling Ms. Thompson’s allegations could support finding that Security Atlantic and REMN were her joint employers.  Joint employment is when two or more companies “exert significant control” over the same employee.  I discussed the test to determine whether a company is a joint employer in a previous article, Third Circuit Holds Parent Company Not Responsible For Wholly-Owned Subsidiary’s Overtime Violations.

In reaching this conclusion, the court relied on Ms. Thompson’s claim that Security Atlantic hired her but an REMN trained her; Security Atlantic called REMN its “sister company;” and virtually every employee of Security Atlantic seamlessly became an employee of REMN in June 2010.  However, it cautioned that additional evidence ultimately might establish that Security Atlantic and REMN were too independent to be considered joint employers.

The Third Circuit also concluded the allegations could support finding REMN liable for REMN’s overtime violations as Security Atlantic’s successor in interest.  Under federal law, the factors to determine successor liability are (1) the continuity between the workforce and business operations of the two companies, (2) whether the successor had notice of the predecessor’s legal obligations, and (3) the predecessor’s ability to pay its legal obligation.  It found support for the first factor since Ms. Thompson claims after February 2010 REMN operated the same as Security Atlantic had in the past.  It found support for the second factor since most of REMN’s former management worked for Security Atlantic, making it likely they were aware of any past overtime violations.  Likewise, it found support for the third factor since REMN is apparently defunct, suggesting it would be unable to pay any damages awarded to Ms. Thompson.

Finally, the Third Circuit reversed the District Court’s decision to dismiss the two individual defendants, Mr. Lamparello and Mr. Chapman, from the case.  It explained that a company’s owner, officer or supervisor can be personally liable as a joint employer under the FLSA if he or she had (1) supervisory authority over the employee and (2) some responsibility for the alleged violation.  Since Ms. Thompson alleges Mr. Lamparello and Mr. Chapman are co-owners of REMN, run the company’s day-to-day operations and make decisions about hiring, firing and compensation, they potentially could be personally liable for the alleged overtime violations.


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The City of Newark recently enacted an ordinance requiring certain employers to provide paid sick leave to their employees.  Newark is now the second city in New Jersey to pass a paid sick leave law.  As discussed in a previous article, effective January 24, 2014, Jersey City Law Requires Employers to Provide Paid Sick Leave.

To Whom Does the Law Apply?

The Ordinance applies to most employees who work in Newark for at least 80 hours per year.  However, it does not apply to the federal, state or local government, or to employees of any school district or Board of Education, including Rutgers University.

How Much Time Off Are Employees Entitled to Take?

Sick Female Employee Taking Paid Time Off From WorkCovered employees are entitled to accrue at least of one hour of paid sick time for every 30 hours they actually work.  Companies are required to provide up to 40 hours of paid sick time per year to any employees who are child care workers, home health care workers, or food service workers.  For other employees, companies with 10 or more employees are required to provide employees up to 40 hours of paid sick time per calendar year, and companies with fewer than 10 employees are required to provide up to 24 hours of paid sick time per year.

Employers must either allow employees to carry over a minimum of four hours of unpaid sick leave to the following calendar year, or pay employees for their unused sick time.  However, employers are not required to permit employees to use more than 40 hours of paid sick time during any given year.

For What Purposes Can Employees Use Their Paid Sick Time?

Employers must permit employees to use the paid sick time they earn for a variety of reasons including but not limited to:

  1. Their employee’s own (a) physical or mental illness, injury or health condition; (b) diagnosis with a physical or mental illness, injury or health condition; or (c) preventive medical care; and
  2. For the employee to care for a family member’s (a) mental or physical illness, injury, or health condition; (b) medical diagnosis of a mental or physical illness, injury, or health condition; or (c) preventive medical care.

The law defines “family member” very broadly to include (1) spouses, civil union partners and domestic partners; (2) natural children, adopted children, stepchildren and foster children of the employee and the employee’s spouse, civil union partner or domestic partner; (3) grandparent and grandparents of the employee’s spouse, civil union partner or domestic partner; (4) grandchildren; and (5) siblings.

What Are the Requirements to Take Time Off?

For emergencies, employers must permit employees to take time off as long as they provide as much advance notice as practical.  For any other unforeseeable sick time, employers can require employees to request the time off before the beginning of their scheduled shifts.  When the need for paid sick leave is foreseeable, employers can require employees to provide up to seven days advance notice.

After an employee uses sick leave three days in a row, the employer can require a doctor’s note showing the need for the time off was covered by the Ordinance.  However, the employer cannot require an explanation of the nature of the illness.

Protection from Retaliation

The Ordinance prohibits retaliating against employees who properly exercise their rights under it.  This includes prohibiting employers from threatening, disciplining, firing, suspending, or taking other adverse actions against employee because they exercise their rights under it.

The statute goes into effect on May 29, 2014.  A copy of the full text is available on the City of Newark’s website.

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Earlier this year, the Second Circuit Court of Appeals ruled that a company’s Chief Executive Officer can be held personally liable for a company’s overtime violations even if he had no personal involvement in violating the law.

In Irizarry v. Catsimatidis, a group of employees filed a class action overtime claim against Gristede’s Foods, Inc. They brought federal claims under the Fair Labor Standards Act (FLSA) as well as claims under the New York Labor Law. They also named the company’s Chief Executive Officer, its District Manager, and its Vice President as individual defendants in the lawsuit.

Eventually, the court ruled in favor of the employees, finding Gristede’s failed to pay them time-and-a-half for their overtime hours, in violation of the FLSA and New York State law. At the time the court did not decide whether any of the individual defendants were personally liable.

Employee working overtime class action lawsuit.jpgGristede’s and the employees subsequently agreed to settle the case. However, Gristede’s failed to pay the employees the money they were owed under the settlement agreement. As a result, the employees asked the court to hold the company’s Chief Executive Officer, John Catsimatidis, personally liable for failing to properly pay them for their overtime work. The Court granted the motion, finding Mr. Catsimatidis was an “employer” under both the FLSA and state law. Mr. Catsimatidis appealed.

As explained by the appellate court, when determining whether an individual is an “employer” under the FLSA, the key question is whether he or she had “operational control” over the company. Relevant factor to make that determination include whether the individual (1) had the authority to hire and fire workers; (2) supervised the employee’s work; (3) made decisions about employee compensation; or (4) maintained employment records.

The court further explained that to be held personally liable, an individual’s operation control has to include some personal involvement in decisions about the company’s working conditions, business operations, personnel, or compensation, and has to have some relationship to the employee’s job. However, the individual does not necessarily need have to have been personally involved in the violation of the FLSA and does not have to have been involved in supervising the employees on a day-to-day basis as long as he has to have the authority to do so.

The court found Mr. Catsimatidis had sufficient authority and control over Gristede’s to be held personally liable for its violations of the FLSA. He was responsible for the company’s major long-term decisions, and had the right to close the business if he wanted. He regularly visited stores, made suggestions to managers, addressed individual problems, and reviewed customer complaints. He had the authority to hire and fire employees, even though he rarely exercised it. In addition, his name was electronically signed to all employee paychecks. He had ultimate financial control over the company, and kept track of its total payroll. Accordingly, the court found Mr. Catsimatidis was personally liable for the company’s violation of the FLSA.

Having found Mr. Catsimatidis personally liable, the Second Circuit Court of Appeals chose not to rule whether he also was personally liable under New York State law. Instead, it sent the case back to the District Court to consider that issue.

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