Tipping the Scales: The Tipped Employee Final Rule Not So Final AfterallYou may recall we previously reported on the DOL’s new tipped employee regulations that were set to take effect in March 2021. Well, the DOL, under the new administration, is now hitting pause on that final rule. The Biden DOL has announced that portions of the final rule will take effect on April 30, 2021, while other portions will be delayed and possibly revised pending the department’s review and invitation for comments.

A quick refresher

The final rule changed tip pooling and sharing provisions to allow employers who do not take a tip credit to implement mandatory tip pools that can include employees who do not customarily receive tips, such as dishwashers, cooks, chefs, and custodians.  Additionally, the final rule imposed civil penalties for employers who unlawfully keep or retain employees’ tips. Finally, the final rule did away with the 80/20 rule and sanctions taking a tip credit for any time during which a tipped employee is performing non-tipped duties immediately before or after their tipped duties, i.e., preparing utensils or refilling condiments.

What did the Biden DOL hit “go” on?

As mentioned above, a portion of the final rule will take effect on April 30, 2021 – so, what is getting the green light? In its Notice of Proposed Rulemaking, the DOL indicated that one of the reasons it is taking another pass at the final rule is because “tipped workers are among those hardest hit amid the pandemic…and protecting these essential frontline workers [is] a priority.” So, the current administration’s DOL is getting behind the portion of the rule that would expand the universe of who can participate in a mandatory tip pool if the employer does not take a tip credit. The DOL hopes this will boost those workers’ earnings.

So– as of April 30, if you do not take a tip credit, you may allow dishwashers, cooks, chefs, custodians and other non-tipped employees to participate in and take a cut of the mandatory tip pool. If you do so, you must comply with added recordkeeping obligations and notate which employees receive tips, and the weekly or monthly amount of tips reported by the employee. The other portion of the final rule getting the green light is that employers, managers, and supervisors are prohibited from keeping any tips received by employees.

What did the Biden DOL hit “pause” on?

The DOL issued two new proposed rules related to the Tipped Employee Final Rule. One would delay the effective date of specific provisions of the rule, and the other asks for comments on the substance of certain provisions. The provisions at issue include:

  • Allowing a tip credit for tipped and non-tipped duties performed contemporaneously
  • The imposition of civil penalties for “keeping” an employee’s tips
  • Deciding when a violation is “willful” for the purpose of assessing civil penalties
  • The definition of “managers or supervisors” who will be excluded from keeping tips
  • Required recordkeeping with regard to mandatory tip pools

Comments to the two proposed rules are due by April 14, 2021, and May 24, 2021, respectively. For now, what is clear is that tips are the property of the employee and cannot be kept or retained,  and “back of the house” workers can take part in mandatory tips pools if you do not take a tip credit. What remains to be determined is when civil penalties should be assessed for “keeping” tips, whether a tip credit is appropriate for dual tasks (tipped and non-tipped work performed contemporaneously), and whether the definition of “managers and supervisors” should be amended to reflect that some managers and supervisors perform tipped work and/or receive tips directly from customers. As is often the case with rulemaking by our administrative agencies, we will stay tuned, and you can count on the fact that we will provide an update when this final rule is finally decided.

Coming Back (or Staying Gone) for More: ARPA Extends Tax Credits for Providing COVID-19 LeaveJust when you had your COVID-19 leave policies in place, Congress goes and passes new legislation: the American Rescue Plan Act (ARPA). Remember, as we outlined in a previous blog post, the Families First Coronavirus Response Act (FFCRA) was passed in March of last year and provided that employers with fewer than 500 employees had to give emergency paid sick leave (EPSL) and emergency family medical leave (EFMLA) to employees for certain reasons related to COVID-19. The FFCRA was set to expire on December 31, 2020, but just a few days beforehand along came the Consolidated Appropriations Acts (CCA), which didn’t extend the FFCRA but rather incentivized employers to continue providing COVID-19-related leave in exchange for a tax credit.

Now, Congress has passed the ARPA. Like the CCA, the ARPA doesn’t require you to give FFCRA paid leave but gives you a tax credit if you choose to do so, at least until September 30, 2021. So, what else is different about the ARPA?

Two Categories of Leave: EPSL and EFMLA

The ARPA increases the qualifying reasons for EPSL to nine — the six original reasons and three new ones. Specifically, you can voluntarily grant EPSL (i.e., 10 days of paid leave — which may be slightly different than the FFCRA’s 80 hours), to an employee who is:

  1. Subject to state, federal, or local quarantine or an isolation order related to COVID-19
  2. Advised by a healthcare professional to self-quarantine due to COVID-19 concerns
  3. Experiencing COVID-19 symptoms and seeking a medical diagnosis
  4. Seeking or awaiting results of a COVID-19 test after exposure or employer request (NEW)
  5. Obtaining a COVID-19 vaccine (NEW)
  6. Recovering from the side effects of a COVID-19 vaccine (NEW)
  7. Caring for an individual subject to quarantine or an isolation order or who has been advised by a healthcare professional to quarantine due to COVID-19
  8. Caring for a child under age 18 because schools or places of childcare have closed
  9. Experiencing any other substantially similar condition as defined by the U.S. Dept. of Health and Human Services

The rate of pay has not changed:

  • For reasons 1–6, the employee is paid his or her regular rate, capped at $511/day
  • For reasons 7–9, the employee is paid at 2/3 of his or her regular rate, up to $200/day

Resetting the of Amount of EPSL Leave

The ARPA resets an employee’s available EPSL days as of April 1, 2021. In other words, any FFCRA EPSL days an employee took prior to April 1, 2021, will not be counted against his or her available 10 days of ARPA leave. However, there is no carry over, so an employee who has not exhausted all of his or her FFCRA EPSL leave as of April 1, 2021, will not have more than 10 days of EPSL leave on top of any unused leave.

EFMLA Changes

We all know that the FFCRA and CCA provided EFMLA to care for a child due to school or daycare closure due to COVID-19 or to care for a family member. The ARPA extends the EFMLA qualifying reasons to all nine of the EPSL reasons listed above. This is a substantial change.

The ARPA removes the provision that the first two weeks of EFMLA are unpaid. Therefore, employees can now take 12 weeks of paid EFMLA for a qualifying reason.

It is unclear right now whether an employee’s bank of EFMLA resets, as it does with EPSL leave. We will need to wait for Department of Labor (DOL) guidance on this issue.

Remember, although the qualifying reasons for EPSL and EFMLA are the same, EPSL is a separate benefit. An employee who takes two weeks of EPSL still has 12 weeks of EFMLA available. So, it appears that an employee could take up to 14 weeks of paid leave. (Remember, you still get to decide whether to extend this benefit to your employees.)

Intermittent Leave Is Still Up to You

As for intermittent leave, you and the employee must agree to an intermittent leave schedule or it is not available. If your employee needs to take leave to care for his or her child whose school or childcare is closed or unavailable, you can agree to an intermittent schedule, regardless of whether he or she is working remotely. Additionally, if the employee is working remotely (either regularly or because of the COVID-19 crisis), you and the employee can agree to an intermittent schedule. Intermittent leave is not permissible if (a) an employee must report to a worksite (rather than work remotely) and (b) is taking leave because he or she is sick with or is taking care of someone who is sick with COVID-19.

Tax Credits

Employers who voluntarily give EPSL and EFMLA can continue to take a tax credit. However, the ARPA disqualifies employers from receiving a tax credit if they (1) fail to comply with any provisions of the FFCRA, including its anti-retaliation provisions, or (2) discriminate in favor of highly compensated employees, full-time employees, or employees on the basis of their employment tenure.

Takeaways

Keep in mind that you are still not required to continue giving EPSL and EFMLA. This is new legislation, so keep an eye out for new regulations and clarifications from DOL. In the meantime, if you choose to make this leave available to your employees, make sure to review the qualifying reasons for leave and follow the rules on the amount of leave and time available.

Weeding Out Claims by Agricultural Workers – The NLRA, the Agricultural Exemption, and the Cannabis IndustryIn a recent Advice Response Memo, the National Labor Relations Board (NLRB) indicated that employees of a cannabis growing operation were exempt from the National Labor Relations Act (NLRA), meaning that the employees were not entitled to the NLRA’s protections. The employees had alleged that the cannabis operation interfered with their attempts to unionize, but the NLRB advised that the two workers fell under the NLRA’s agricultural workers exemption. Therefore, the employees’ claims were not within the NLRB’s jurisdiction.

While this Advice Response Memo is not a definitive NLRB holding on whether workers in the cannabis industry are generally protected by the NLRA, it provides key guidance on the agricultural exemption and for employers and employees in the cannabis industry generally.

The NLRA

The NLRA provides employees with the right to form and join a union, and employers cannot interfere with those employees’ attempts to do so. “Agricultural workers,” however, are among the various categories of workers exempt from the NLRA’s definition of “employees.” According to an appropriations rider attached to the NLRB’s budget, the NLRB cannot use funds “to organize or assist in organizing agricultural laborers.” The rider requires that the NLRB broadly define “agriculture,” using Fair Labor Standards Act’s definition, which characterizes more workers as exempt. This definition includes “the production, cultivation, growing, and harvesting of any agricultural or horticultural commodities” and any practices performed “as an incident to or in conjunction with such farming operations.” If an employee is an agricultural worker under these definitions, they are exempt from the NLRA and thus outside of the NLRB’s jurisdiction.

The Advice Response Memo

A Regional NLRB office recently sought the NLRB’s Advice Division’s guidance on charges filed against Agri-Kind, a cannabis growing operation in Chester, Pennsylvania. Two Agri-Kind employees alleged that their supervisor’s union-related comments interfered with their attempts to unionize. The regional office asked the NLRB’s Advice Division “(1) whether the two employees at issue are exempt from the Act because they are agricultural laborers; (2) whether the Board should assert jurisdiction over the Employer, a marijuana enterprise; and (3) whether remarks from an agent of the Employer violate Section 8(a)(1).” Because the NLRB’s Advice Division concluded that the employees were exempt, the memo did not address the latter two issues.

The NLRB’s Advice Division noted at the outset that “the Board has not ruled on whether employees of a marijuana enterprise are agricultural laborers or statutory employees.” The memo ultimately concluded that “although the two employees work in indoor grow rooms akin to greenhouses, which the Board has previously distinguished from traditional exempt agricultural work,” the workers nonetheless fell under the agricultural exemption. The NLRB’s Advice Division relied on the following:

  • 70% of the first employee’s job responsibilities involved harvesting, de-fanning, and skirting marijuana plants, which included cutting them from their stalks, removing large leaves, and taping on labels.
  • The second employee was a “trimmer” who planted, harvested, cleaned, and packaged the plants.
  • Neither worker used machinery nor processed the plants into other products, such as ointments.

Taking this into account, the NLRB’s Advice Division found that the employees were agricultural workers because they did not “significantly transform the natural product from its raw state” and instead worked primarily by hand and “substantially engage[d] in the primary agricultural functions of harvesting, pruning, and sorting of plants.” The NLRB’s Advice Division advised the regional office that such a conclusion “requires dismissal of these charges.”

Relationship to Past Guidance

The NLRB’s Advice Division provided even further guidance by distinguishing this memo from previous advice memos in which the division concluded that employees did not fall under the agricultural exemption. The first one, issued in 2013, involved employees who processed marijuana plants after they had been grown, harvested, and cultivated by other employees. The employees used machinery to extract and process byproducts from the plants and, in turn, create marketable products. Thus, the NLRB’s Advice Division concluded that those employees were not agricultural workers because they “transformed the raw plant into retail products, whereas the two employees [at Agri-Kind] handle the plants by hand and do not substantially transform them.”

In the second memo, issued in 2015, the employees at issue performed tasks similar to those of the Agri-Kind employees. However, the employees did not engage in any NLRA organizing activity, such as attempting to join or start a union. Thus, the rider, and its agricultural exemption, did not apply because it is implicated only in cases involving bargaining units (i.e., a group of workers placed together for purposes of union representation and collective bargaining). Instead, the NLRB’s Advice Division applied a different test, commonly used for greenhouse employees, and found that the employees were not exempt. In Agri-Kind’s case, on the other hand, the division noted that the two employees were “involved in formal union organizing” and therefore implicated the rider’s broader definition of “agriculture.”

Going Forward

While it may be too soon to realize the full implications of this Advice Response Memo, there are a few important takeaways for the cannabis industry.

First, although this is not the first time the NLRB has addressed marijuana workers generally, in light of the fact that marijuana remains a Schedule I narcotic under the federal Controlled Substances Act, it is worth noting that the NLRB takes the position that federal law can protect workers engaged in an activity that violates federal law. The marijuana industry should not take that fact for granted, as it stands in stark contrast to, for example, federal courts that do not extend the protection of federal bankruptcy laws to marijuana businesses.

Second, although the NLRB in this instance concluded that the employees at issue fell outside the scope of the NLRA, this should not be seen as an indication that all, or even most, marijuana employees are not covered by the NLRA. As noted above, the NLRB has previously opined that workers who processed marijuana fell within the scope of the NLRA. Perhaps the real takeaway here is that the NLRB will closely examine the facts and circumstances of the workers’ job responsibilities to determine whether any given individual is covered by the NLRA.

Finally, the Advice Response Memo could offer astute cannabis employers a roadmap for crafting the responsibilities of certain workers to make it more or less likely that the worker will be classified as an “employee” under the NLRA or fall under the agricultural workers exemption. Because the NLRB will look to things like the amount of time an employee performs certain tasks and the nature of those tasks, an employer with an eye on the application of the NLRB may think carefully about the type and amount of tasks certain employees are asked to undertake.

As the cannabis industry grows in the United States, the NLRB will be asked to answer questions that increase in number and complexity.  Those answers will play a critical role in how the industry develops and the ability of those workers in the industry to take advantage of federal labor laws.

*             *             *

Bradley lawyers have the breadth of experience to provide full-service representation to our cannabis clients, advising clients on the legality of residency requirements and other common cannabis issues. As strategic advisors, we give each client the practical counsel they need to make the best decisions for their businesses.

Bradley’s Cannabis Industry team is a leading voice in the cannabis sector. Our attorneys have presented on cannabis issues at conferences around the country and have been quoted in an array of legal and mainstream publications, from the National Law Journal, Law360 and Westlaw Journal to the Atlanta Journal-Constitution, the Associated Press, and ABC News.