Take Two: Alabama’s City Versus State Minimum Wage Dispute to Get Full Appellate ReviewMinimum wage laws invite controversy, and Alabama’s latest tug-of-war between the state and its largest city is going to get another wider review. You may recall that back in 2015, Birmingham, Alabama, passed a local minimum wage law. On the heels of that move, the Alabama Legislature then passed a state-wide minimum wage law, preempting local city laws. In response to the state’s new law, some Birmingham citizens, along with the NAACP, contended that the law discriminated against minorities and filed suit. After the federal district court dismissed the case, in July 2018 a three-judge panel of the Eleventh Circuit reversed, finding the plaintiffs asserted a plausible 14th Amendment claim. Under that decision, the litigation could go forward. That ruling, however, was recently vacated, and now every judge on the Eleventh Circuit court will weigh in on the matter.

Minimum Wage Controversy

In April 2015, the Birmingham City Council passed a resolution calling on the Alabama Legislature to raise the minimum wage to $10 per hour. The Alabama Legislature declined, so the Birmingham City Council adopted its own ordinance to raise the minimum wage, first to $8.50 per hour and then to $10.10 per hour.

Almost immediately thereafter, a state representative introduced a bill to quash the local ordinance and establish a uniform minimum wage throughout the state. The state has no minimum wage above the current federal minimum wage of $7.25 per hour. The Alabama House passed the bill in February 2016. In the meantime, the Birmingham City ordinance raising the minimum wage to $10.10 per hour went into effect, but only briefly. The next day, the Alabama Senate passed, and then Gov. Bentley signed, the Minimum Wage Act mandating the minimum wage be set at the federal minimum of $7.25 per hour and preempting all local laws. The law preempts all local labor and employment laws that a city or municipality might attempt.

Procedural Background

A few months later, a group of Birmingham residents, along with public interest groups, filed suit against the governor and state attorney general claiming racial discrimination under the 13th, 14th, and 15th Amendments of the U.S. Constitution and Section 2 of the Voting Rights Act. The plaintiffs contended that the state law has both a discriminatory purpose and effect. The state argued in response that the law is facially neutral. The federal district court dismissed all claims in February 2017, and the plaintiffs appealed to the Eleventh Circuit.

The three-judge panel of the Eleventh Circuit affirmed the dismissal of the claims under the 13th and 15th Amendments, as well as under the Voting Rights Act. However, it reversed the district court’s dismissal as to one claim, finding that the plaintiffs stated a plausible claim that the Minimum Wage Act purposely discriminated against Birmingham’s black citizens in violation of the 14th Amendment. In reversing, the panel highlighted that, according to the complaint, the act denied 37 percent of the city’s black wage earners a higher wage, compared to only 27 percent of white workers. Further, according to the complaint, black workers earn, on average, $1.41 less per hour in the city and $2.12 less per hour statewide than white workers. The panel’s ruling found it plausible that the act bore more heavily on black workers and that the plaintiffs had indeed stated a viable claim, deeming the legislative vote to have been “rushed, reactionary, and racially polarized.”

Shortly after the panel’s ruling, the State of Alabama and its attorney general filed a motion to have the matter reheard by the entire Circuit Court. In its motion, the state said the case “raises fundamental questions about the dignity of States, the efficacy of federal-court proceedings, the standard for finding state-sanctioned racism, and the role of courts in shaping public discourse” making it “an exceptionally important [case] that absolutely requires the full Court’s attention.”

Ruling Vacated and To Be Reviewed by Entire Circuit Panel

On January 30, the Eleventh Circuit granted the rehearing request (called “rehearing en banc”), thereby vacating the previous decision. Now the entire Circuit Court (12 judges) will review the claims and the district court’s dismissal. A rehearing of this nature is generally rare and granted only when necessary to maintain uniformity of decisions or for questions of “exceptional importance.” Reading the tea leaves of the decision suggests that the court will alter or revise the panel’s previous ruling in some way, but that is far from certain. Stay tuned for what will be a significant ruling related to Alabama’s minimum wage law and the discrimination allegations. For now, however, the minimum wage in Birmingham is still $7.25 an hour.

Does the Shutdown Shut Off FLSA Obligations to Unpaid Government Workers?The U.S. federal government shutdown has continued for more than a month, with no probable end in sight. While many government employees are furloughed, an estimated 420,000 others are deemed “essential employees” and are required to continue working without pay during the shutdown. Several essential employees have recently filed putative collective action lawsuits, claiming that the shutdown violates their wage-and-hour rights under the Fair Labor Standards Act because they are working without pay. Several of the plaintiffs are customs/border protection officers, as well as prison guards, and have been previously classified as non-exempt by the Department of Homeland Security.

Plaintiffs in these new lawsuits are likely to succeed based on precedent from several years ago. Non-exempt, essential employees brought a similar lawsuit during the 2013 government shutdown, and the court held that the government’s failure to pay these employees during the shutdown violated their rights to minimum wage and overtime pay. The court additionally awarded liquidated damages in that case.

Until the government reopens and the purse strings are untied, essential employees are going to continue to work without pay. Thus, it will be difficult for government employers to avoid allegations of wage-and-hour violations. Those employers can control, however, their responses to any employee complaints about pay (or lack thereof) so as to avoid a retaliation claim under the Fair Labor Standards Act. Government employers should proceed with caution in issuing any discipline or otherwise making employment decisions as to non-exempt essential employees until the shutdown ends and those individuals have received back pay for their work during the shutdown.

In case you didn’t know, Oregon enacted the “Fair Work Week” law, making it the first state to legally restrict the scheduling practices of employers in the service sector. The highlights include:

  • an obligatory rest period for employees between shifts,
  • written work schedules in advance of shifts, and
  • additional pay for employees if employers want to deviate from the written work schedule.

Ahead of Schedule? What Oregon’s Fair Work Week Bill Means to the Retail, Hospitality, and Food Service IndustriesThe obligations for covered Oregon employers are extensive and onerous. Oregon employers would be well served to begin taking steps to ensure they are prepared to comply well before the effective dates (primarily in July 2018).

Which Employers Are Affected?

The law applies to retail, hospitality, and food service establishments in Oregon that employ 500 or more employees worldwide. In calculating the number of employees, a chain or integrated enterprise is considered one employer. If a separate entity controls the operation of another entity, the entities could collectively be considered an integrated enterprise. The factors to consider in this analysis are the interrelationship between the operations of multiple entities, shared common management, centralized control over labor, and common financial control. Oregon’s Commissioner of the Bureau of Labor and Industries is to adopt further rules outlining when and under what circumstances separate entities constitute a single integrated enterprise.

Which Employees Are Covered?

Oregon employees covered under the law must not only be one of at least 500 employees worldwide but also engaged in providing services relating to retail trade, hotels, motels, or food services, as those terms are defined in the 2012 North American Industry Classification System. However, the law excludes salaried employees, workers supplied by a leasing company, and employees of a business that provides services to or on behalf of the employer.

What Are the Key Provisions?

  1. Work Schedule Estimate: At the time of hire, an employer must provide a new employee with a written, good-faith estimate of the employee’s work schedule. The estimate must (a) include the expected monthly median number of hours, (b) explain that the employee may elect to be on a voluntary standby list, (c) indicate whether an employee who is not on the standby list can expect on-call shifts, and (d) set forth an objective standard for on-call shifts.
  2. Standby List: An employer may maintain a standby list of employees who may be asked to work additional hours. The employee must agree in writing to be on the standby list, and the employer must notify the employee in writing of the standby procedures. The employer’s notification must include (a) that the list is voluntary, (b) how an employee can get off the list, (c) how an employer will offer additional hours, (d) how the employee accepts additional hours, and (e) that the employee is not required to accept the additional hours.
  3. Advanced Work Schedule: An employer must provide a written work schedule at least seven days before the first day of work scheduled (beginning July 1, 2020, this advance notice period expands to 14 days.) The work schedule must be posted in a conspicuous and accessible location and written in the language the employer uses to communicate with its employees. If an employer subsequently changes the work schedule, the change must be timely and the employee can decline the change.
  4. Right to Rest: Unless an employee agrees, an employee generally gets a 10-hour break between shifts.
  5. Compensation for Schedule Changes: If an employer changes a work schedule (without the required advanced notice) and the change either (a) adds more than 30 minutes to a shift, (b) alters the date, start time, or end time with no loss in hours, or (c) constitutes an additional shift, then the employee gets an additional 1 hour of pay at the regular rate (over and above wages earned). If an employer changes a work schedule (without the required advanced notice) and reduces or cancels an employee’s scheduled hours, then the employee gets 1.5 times the regular pay rate for each hour scheduled but not worked. Likewise, an employee scheduled for an on-call shift but not asked to perform work gets 1.5 times the regular pay rate for each hour scheduled but not worked.

What Additional Rights Do Employees Have?

The law also contains anti-retaliation provisions and provides employees with a private right of action. Employers are expressly prohibited from interfering with an employee’s rights protected under the law and from retaliating or discriminating against an employee for asking about the law. Also, an employer may not retaliate against an employee who either (a) chooses not to be on the standby list, (b) requests removal from the standby list, or (c) declines to work additional hours as a result of being on the standby list. An employer is subject to a civil penalty (not to exceed $2,000) for coercing an employee into being added to the standby list, with each violation constituting a separate offense.

If You Are a Retail, Hospitality, or Food Service Employer, What Should You Do?

As of today, Oregon is the only state to have enacted this kind of scheduling law. Therefore, so long as you are not a qualifying “employer” with a business establishment in Oregon, there is no need to take any immediate action. However, if you are covered under the law or anticipate entering the Oregon market, you should begin preparing. The first step is to determine whether your business is a qualifying “employer” and is, thus, affected by this law.

The passage of Oregon’s Fair Work Week law – coupled with the recent passage of similar citywide legislation – suggests that you can expect more restrictions on the scheduling practices of retail, hospitality, and food service businesses in the coming years. Apart from the economic effects resulting from the discontinuation of on-call scheduling, the penalties for violating such laws (if Oregon’s law is any example) could be significant. Therefore, employers should keep an eye on this apparent legislative trend and should not hesitate to seek out legal counsel if they believe they might be affected.