Florida Federal Court Rules That Winn-Dixie’s Website Violated the ADA

By Thomas J. Barton, Kate S. Gold, Cheryl D. Orr, Meredith C. Slawe and Matthew J. Fedor

Retailers throughout the country have been besieged by lawsuits and demand letters alleging that their websites are not accessible to the visually impaired and that this lack of accessibility violates Title III of the Americans with Disabilities Act (ADA). The plaintiffs’ bar, without definitive guidance from the Department of Justice (DOJ) or the courts, has assumed that retail websites are “places of a public accommodation” under the ADA and that the appropriate compliance level should be the Website Content Accessibility Guidelines (WCAG) 2.0 A or AA.
Continue reading “Florida Federal Court Rules That Winn-Dixie’s Website Violated the ADA”

Suit Shopping: Deceptive Pricing Class Actions Persist

Kate Gold published an article, along with Kathryn Deal, Meredith Slawe, Kate Villanueva, Dan Brewer and Ashley Super titled, “Suit Shopping: Deceptive Pricing Class Actions Persist” for the California Retailers Association’s Golden State Report.

Recent years have seen a considerable increase in deceptive pricing litigation, with plaintiffs’ attorneys turning to untried theories to help advance their cases. As a result, retailers are facing more high-risk class action suits that could lead to significant exposure, reputational damage, and considerable litigation costs. The article details two potential sources of suits—compare-at pricing and shipping charges—and how courts and agencies have thus far responded to such matters.

Read “Suit Shopping: Deceptive Pricing Class Actions Persist.”

Spotlight on Fair Pay for Female Law Firm Partners: Class Action Lawsuit Filed Against Sedgwick

By Kate S. Gold

Traci Ribeiro’s class action lawsuit against her employer Sedgwick LLP is the latest in a string of lawsuits in the pay equity battle, which has been highlighted in this year’s Presidential election and through the recent EEOC claim filed by the U.S. womens’ soccer team. Ribeiro is a non equity partner who claims that, as one of the firm’s three highest revenue generating partners, she has been denied equity partnership and was subjected to retaliation for filing an EEOC complaint claiming gender discrimination.  She seeks to represent a class of past and present female attorneys in partnership track positions at the firm; her complaint alleges violations of the California Fair Pay Act, Illinois Fair Pay Act, and Federal Equal Pay, as well as gender discrimination and retaliation under the California FEHA, Illinois Human Rights Act, and Title VII.  Ribeiro claims, in addition to routinely paying women lawyers less than their male counterparts, Sedgwick has denied women equity partnership and membership on its Executive Committee (until 2016, when Ribeiro made a formal complaint about gender discrimination).  She asserts discrimination under both a disparate treatment and disparate impact theory.

Among the more remarkable allegations in her complaint is that female associates were paid $40,000-$50,000 less annually than their male counterparts, and that despite her own high revenue generation, she was denied promotion to equity partnership three years in a row and, in 2015, an equity partner promotion was given to a male with less than 10% of Ribeiro’s revenues. But there is clearly a lot we can’t tell from reading the complaint:  as to the gender discrimination claims, what is the firm’s criteria and process for determining compensation and partnership and how is it biased in favor of men?  As to the fair pay claims, will the firm rely on the established defenses to pay disparities, such as a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or upon a bona fide factor other than sex, such as education, training, or experience? Employers and employment lawyers will no doubt be following this case as the topic of pay equity continues to hold a firm place in the public spotlight.  That is, unless the case ends up in a private arbitration.  Ribeiro is also seeking declaratory relief that the dispute is not subject to the parties’ arbitration agreement (and is also attempting to stay Sedgwick’s arbitration demand which also seeks a declaration that the dispute should be compelled to arbitration).  For more information on compliance with Title VII, the Equal Pay Act and various state laws regarding gender discrimination and fair pay, contact Kate Gold or Lynne Anderson.

Seventh Circuit: Tipped Employees Can Perform Limited Non-Tipped Work At The Tip Credit Rate Of Pay

By William R. Horwitz

The U.S. Court of Appeals for the Seventh Circuit issued a significant decision last week addressing the compensation of tipped employees who perform non-tipped work.  In Schaefer v. Walker Bros. Enterprises, 2016 WL 3874171 (7th Cir. July 15, 2016), a restaurant server in Illinois pursued a class and collective action alleging, among other things, that his employer violated state and federal wage and hour laws by failing to pay servers minimum wage for the time they spent on non-tipped duties.  The Seventh Circuit affirmed summary judgment dismissal of the lawsuit.  The Court held that an employer may compensate a tipped employee at the reduced “tip credit rate” of pay for:  (1) limited non-tipped work incidental or related to tipped work; and (2) other negligible non-tipped work.  The decision provides helpful guidance to restaurant employers regarding the types of duties that tipped employees may perform at a reduced rate of pay.

The Facts

Robert Schaefer worked as a server at three Original Pancake House restaurants in Illinois.  Schaefer and other servers spent most of their time performing tipped work, such as “taking customers’ orders and delivering food.”  However, they also “spent some of their time doing non-tipped duties.”  In this regard, “[t]hey were required to wash and cut strawberries, mushrooms, and lemons; prepare applesauce and jams by mixing them with other ingredients; prepare jellies, salsas, and blueberry compote for use; restock bread bins and replenish dispensers of milk, whipped cream, syrup, hot chocolate, and straws; fill ice buckets; brew tea and coffee; wipe toasters and tables; wipe down burners and woodwork; and dust picture frames.”

According to Schaefer, these non-tipped tasks rotated among the servers.  Overall, servers estimated spending between 10 and 45 minutes daily on these tasks, depending on which tasks were assigned on a given day and the server’s “experience and aptitude” at performing them.  Because Schaefer and other servers were tipped employees, the restaurants paid them below the standard minimum wage.  Schaefer argued that the restaurants were required to pay the servers at least the standard minimum wage for the time they spent performing non-tipped work.

The Lawsuit

Schaefer filed a lawsuit in the U.S. District Court for the Northern District of Illinois, asserting claims under the Fair Labor Standards Act (“FLSA”) and the Illinois Minimum Wage Law.  He sought to pursue the FLSA claims as a collective action and the state law claims as a class action under Rule 23 of the Federal Rules of Civil Procedure.  The District Court certified the lawsuit as a class action on behalf of about 500 servers and conditionally certified the collective action.  However, the District Court ultimately granted the defendants summary judgment and dismissed the lawsuit.  Schaefer appealed.

The Law

Employers must generally pay non-exempt employees at least the standard minimum wage.  However, both Illinois and federal law allow employers to pay employees who customarily receive tips a reduced minimum wage (known as the “tip credit rate”) with the expectation that tips will make up the difference.  Under Illinois law, an employer must pay tipped employees at least 60% of the regular minimum wage.  (The current tip credit rate in Illinois is $4.95 per hour.  The current tip credit rate under federal law is $2.13 per hour.)

With respect to the work that tipped employees perform, U.S. Department of Labor regulations distinguish between “dual jobs” and “related duties.”  See 29 C.F.R. §531.56.  According to the regulations, an employee who is dual-employed in a tipped occupation and a non-tipped occupation is entitled to receive the regular minimum wage when performing the non-tipped occupation but is only entitled to the reduced minimum wage – or “tip credit rate” – when performing the tipped occupation.  In contrast, an employee who performs non-tipped duties incidental to his or her tipped occupation is not deemed to have “dual jobs” and, as long as the non-tipped duties do not exceed 20% of his or her total work time, is only entitled to receive the tip credit rate.

The Department of Labor’s Field Operations Handbook states that an employer may pay the tip credit rate for time that tipped employees spend on duties related to their tipped occupation, even if that time is not spent on work that produces tips.  For example, a server who occasionally spends time washing dishes may be compensated at the reduced minimum wage, as long as that duty is incidental to the regular duties of the employee and the employee spends no more than 20% of his or her time performing that work.

The Decision

The Schaefer Court observed that the 10 to 45 minutes that servers spent on work other than serving customers amounted to between 2% and 9.4% of their time, far less than the 20% maximum permitted for non-tipped work incidental or related to tipped work.  Schaefer argued that the time he and other servers spent on work other than serving customers was not incidental or related to the tipped worked.  In support of this argument, Schaefer asserted that, at other restaurants, untipped personnel perform this work.  The Seventh Circuit rejected this argument.

According to the Seventh Circuit, “making coffee, cleaning tables,” “ensuring that hot cocoa is ready to serve and that strawberries are spread on the waffles” are generally the type of activities that both the regulations and the Department of Labor handbook deem to be related to a tipped server’s work.  The Seventh Circuit further stated that the fact that untipped employees at other restaurants perform some of these tasks does not necessarily render them unrelated to tipped work.

Nonetheless, the Seventh Circuit characterized certain duties that Schaefer and other servers performed as “problematic.”  In this regard, the Court focused on “wiping down burners and woodwork and dusting picture frames.”  The Court explained that “cleanup tasks cannot be categorically excluded” from tipped work, but acknowledged that these particular tasks “do not seem closely related to tipped duties.”  In any event, the Court quoted the U.S. Supreme Court’s assertion that the FLSA does not convert judges into “time-study professionals.”  The Seventh Circuit explained that Schaefer and other servers spent “negligible” time on these duties.  According to the Court, “the possibility that a few minutes a day were devoted to keeping the restaurant tidy does not require the restaurants to pay the normal minimum wage rather than the tip‑credit rate for those minutes.”[1]

Thus, the Court affirmed summary judgment in favor of the defendants.

Conclusion

Restaurant employers often face lawsuits alleging wage and hour violations, frequently involving the compensation of tipped employees.  Although potential exposure in this area is usually small on an individual employee basis, plaintiffs typically pursue these lawsuits as class and collective actions, driving potential exposure vastly higher.  The Schaefer decision demonstrates that employers can minimize their risk by limiting the non-tipped duties that tipped employees perform.


[1] Schaefer also challenged the notice that the restaurants provided to tipped employees regarding their compensation, but that challenge, which the Court rejected, offers little guidance to employers today because it focused on the law before the Department of Labor issued a May 2011 regulation clarifying the requirements.  See 29 C.F.R. §531.59(b).

Split Circuit Court Decisions Create Uncertainty on Class Action Waivers and likely Supreme Court Review

By Vik Jaitly

Last week the 7th Circuit U.S. Circuit Court of Appeals, in Lewis v. Epic-Systems Corp., held that a company’s arbitration agreement, which prohibits employees from participating in “any class, collective or representative proceeding,” violated an employees’ right to engage in concerted activity under the National Labor Relations Act (NLRA).  The ruling creates a circuit split on the enforceability of class action waivers because the 2nd, 5th, and 8th Circuits each have held that class action waivers do not violate an employee’s rights under the NLRA.  Because of this circuit split, it is likely that the Supreme Court will visit this issue in the near future.

Background on Enforceability of Class Action Waivers

In recent years, federal courts have largely upheld arbitration pacts with class or collective action waiver language that provides that not only must an employee bring his or her claim exclusively in arbitration, but also that he or she must do so on an individual, and not on a class-wide basis. Specifically, in AT&T Mobility v. Concepcion (2011), the Supreme Court ordered the enforcement of arbitration agreements in a dispute involving an arbitration provision in cellphone contracts.  In the process, Concepcion generally held that the Federal Arbitration Act (FAA) preempts state bans on class action arbitration waivers.  The case however, did not directly address the viability of class action waivers in the employment context.

Shortly thereafter, in January 2012, the National Labor Relations Board (NLRB) ruled that an employer could not force its employees to sign arbitration agreements with class waiver provisions because such agreements were unlawful under the NLRA. See D.R. Horton, Inc., 357 NLRB 184 (2012).  On appeal, the 5th Circuit rejected the NLRB’s holding that class waivers in mandatory arbitration agreements are unlawful, joining the 2nd and 8th Circuits, which had issued similar rejections.

Seventh Circuit Opinion

In Lewis v. Epic-Systems Corp., the plaintiff had entered into an arbitration agreement with his employer in which he had waived his “right to participate in or receive money or any other relief from any class, collective, or representative proceeding.”  Lewis later filed a suit in federal court on behalf of himself and other employees alleging that the company had violated the Fair Labor Standards Act (FLSA) by misclassifying the employees and depriving them of overtime.

The employer moved to dismiss plaintiff’s claims and compel arbitration on an individual claim basis. The plaintiff argued that the agreement’s class and collective action waiver was unenforceable because it interfered with his right to engage in concerted activity under Section 7 of the NLRA.  The district court agreed with plaintiff and denied employer’s motion to dismiss, relying primarily on a prior decision the district court had issued adhering to the D.R. Horton’s decision.  The district court believed the 5th Circuit’s majority opinion “never persuasively rebutted the board’s conclusion that a collective litigation waiver violates the NLRA and never explained why, if there is tension between the NLRA and the FAA, it is the FAA that should trump the NLRA, rather than the reverse.”  The employer subsequently appealed the district court’s decision to the 7th Circuit.

In its analysis, the 7th Circuit adopted the NLRB’s reasoning (as stated in D.R. Horton) that engaging in class, collective or representative proceedings is “concerted activity” and a protected right under Section 7 of the NLRA.  Therefore, the court concluded, it would be an unfair labor practice under Section 8 of the NLRA for an employer “to interfere with, restrain, or coerce employees in the exercise” of this right.

Surprisingly, the 7th Circuit rejected the argument that the arbitration agreement must be enforced under the FAA—an argument adopted by all the other circuits that have ruled on this matter. In its ruling, the court focused on the FAA’s savings clause, which provides that arbitration agreements are enforceable except if the agreements themselves are unlawful.  Thus, the court found that Epic’s arbitration agreement is illegal under the NLRA, and because an illegal agreement is not enforceable under the FAA’s savings clause, there is no conflict between the FAA and the NLRA.

General Takeaways for Employers

The Lewis decision leaves employers with several takeaways:  First, employer need to know that class and collective action waivers will not be enforced in federal courts sitting in Illinois, Indiana and Wisconsin, which are the states within the Seventh Circuit’s jurisdiction.

Second, these same agreements will likely continue to be enforced in federal courts sitting in the circuits that have rejected the NLRB’s reasoning in D.R. Horton (for now, 2nd, 5th, and 8th Circuits).

Third, this circuit split will likely involve the input of the Supreme Court in the future but perhaps not between the Presidential election, and the appointment of a ninth Justice, given the desire to avoid a 4-4 split. If the case is brought before the Supreme Court before a new Justice is confirmed by the Senate, and the Supreme Court decision is split 4-4, each of the Circuit’s decisions will remain in effect.

What Are Your Company’s Wage & Hour Risks?

Wage & Hour class actions are being filed at a pace that dwarfs almost all other types of litigation. With a myriad of federal and state laws and regulation, employers not only need to take steps to minimize the risk of a suit, but also must be prepared to defend themselves. Launch the brief video below to hear how Labor and Employment Group partners Cheryl Orr and Stephanie Gournis are helping employers involved in employment class actions, as well as helping companies to minimize the risk of litigation.

 

Wage-and-Hour