Wages
U.S. Supreme Court – The court made it easier for some businesses to prove employees are exempt from overtime and minimum wage standards in a ruling that set a relatively low bar for employers. The case originated from a company that utilized independent contractors as part of its sales force and were summarily sued by those contractors for refusing to pay them overtime and other benefits designated for full-time employees. It hinged on the “burden of proof” that companies have to demonstrate to designate a worker as exempt. Lower courts had split on the issue with some judges finding that businesses had to have “clear and convincing evidence” that someone was exempt from the Fair Labor Standards Act (FLSA) overtime and wage rules. Other judges said the businesses needed to have only a “preponderance” of the evidence in their favor, a lower level of proof. The appellate court sided with the workers and used the heightened standard against the company, saying it had to show the overwhelming weight of evidence was in its favor. The justices unanimously disagreed and said while the law doesn’t say what standard of proof is required for FLSA cases and should default to the standard for civil cases which is the preponderance standard. More details.
Michigan – A newly-formed committee, the House Select Committee on Protecting Michigan Employees and Small Businesses, unanimously advanced to the house floor a legislative proposal to increase the minimum wage to $15/hr by 2029 and to keep the tipped wage at 38 percent of Michigan’s minimum wage. The committee, installed by the new Republican leadership of the house, also advanced compromise legislation on pending paid sick leave legislation. There is a competing minimum wage bill pending in the Democratically-controlled senate that would increase the wage to $15/hr by 2027, while keeping the tipped wage at 38 percent of the standard rate in 2025. After that, the proposed measure would gradually increase the tipped minimum wage to 60 percent of the traditional minimum wage over a 10-year period. Both bills are intended to replace pending mandated wage increases effective Feb. 21. More details.
Washington, D.C. – A public roundtable was held in the city council to examine the impact of Initiative 82, a ballot measure approved by 74 percent of voters in 2022 that would eventually phase out the tip credit by 2027. The first increase in May 2023 took the cash wage for tipped employees from $5.35/hr to $10/hr. This coming July, the wage is scheduled to jump to $12/hr and by July 2027, tipped workers will be paid the full citywide minimum wage (currently $17.50/hr). Since the initiative passed, 74 restaurants have closed in the city. Council members heard from employers, servers, as well as One Fair Wage activists. While no votes were taken, industry leaders were encouraged by the operator and server turnout as well as the tone and tenor of the hearing. More details.
Paid Leave
Maine – The state chamber of commerce filed a lawsuit challenging the state’s newly-implemented paid family leave law. Per legislation enacted in 2023, starting Jan. 1 of this year, Maine employers began withholding a portion of wages to pay into the new paid family and medical leave fund, which the labor department will manage through an online system. The program will allow eligible public and private sector workers to take up to 12 weeks of paid leave for reasons such as illness, to care for a loved one, or the birth of a new child. Employees are expected to be able to access the benefit starting May 1, 2026. The lawsuit argues that the regulations are “unfair” as they require employers to make “irrevocable” payments into the program through the first quarter of 2025, even if they plan to seek an exemption for offering a similar pay leave plan. The labor department’s regulations allow employers who plan to offer comparable paid leave plans for their employees to apply for an exemption beginning April 1, if they meet the criteria. The lawsuit is focused on those funds collected between Jan.1 and April 1. More details.
Labor Policy
Labor Department – The International Franchise Association (IFA) officially endorsed former U.S. Representative Lori Chavez-DeRemer’s nomination to become Labor Secretary. Citing her support for legislation to overturn the Biden Administration’s joint employer rule, the organization felt confident in her understanding of the franchise business model. More details.
DoorDash – The company announced the expansion of its portable benefits savings program for its drivers with a new pilot in Georgia. Expenses covered under the program include retirement savings, health/dental/vision insurance, and paid time off. The company launched its inaugural portable benefits savings pilot program in Pennsylvania last year. 4,400 Pennsylvania drivers enrolled in the program, with nearly 90 percent of surveyed participants saying it has been beneficial for them. Under the partnership with the benefits platform Stride, DoorDash drivers who earn at least $1,000 in the first quarter of 2025 will be eligible to open an account in April and begin receiving deposits. The earnings do not include tips. From April to July, drivers participating in the program will receive deposits from DoorDash equal to $4 of their pre-tip earnings. More details.
Diversity, Equity, and Inclusion
McDonald’s – The company is being sued over its long-running program offering scholarships to Latino and Hispanic students. The lawsuit filed in Nashville by the American Alliance for Equal Rights (AAER), a group opposed to affirmative action, came days after McDonald’s added its voice to a chorus of corporations rolling back or ditching diversity, equity, and inclusion (DEI) initiatives, citing a “shifting legal landscape.” According to the complaint filed by AAER, the company’s efforts are not “sufficient.” McDonald’s has awarded more than $33 million in college scholarships to over 17,000 Hispanic and Latino high school students since 1985 through a scholarship program, which is discriminatory because it is not open to all races, the AAER suit alleges. More details.
Misc.
Starbucks – Starting this month, only paying customers will be allowed to use Starbucks facilities. The company unveiled a new code of conduct that reversed an open-door policy amid widespread reports of abuse. The new policy’s stated goal is to remind customers that they play a role in making Starbucks coffee shops “inviting and welcoming.” It warns that violators will be asked to leave and that staff “may ask for help from law enforcement.” The policy also bans panhandling, smoking, and drug use in Starbucks stores, as well as antisocial behavior, including violence and harassment. This is a reversal of the policy enacted in 2018 after some non-paying patrons in Philadelphia were prohibited from using the restrooms and asked to leave resulting in their forcible removal by law enforcement. The company faced significant public accusations of racial bias and profiling leading to the 2018 policy revision. More details.
Key Takeaways
- The U.S. economy closed out 2024 with another month of massive job growth, adding 256,000 positions in Dec. The unemployment rate dipped to 4.1 percent from 4.2 percent, wrapping up a year that marked a return to pre-pandemic norms, according to Bureau of Labor Statistics (BLS) data released last week. As unemployment rates will likely continue to inch lower, the need for workers will continue to intensify putting further upward pressure on wages. When those same combined market factors have occurred previously, they have served to lessen the enthusiasm for mandated minimum wage hikes.
- DoorDash’s pilot program (now in its third state) is worth your attention. DoorDash continues bolstering the argument for a new class of workers, a hybrid between a traditional W-2 employee and an independent contractor. Traditional “jobs” don’t appeal to many of these workers; however, they still want to access some of the benefits traditionally associated with W-2 positions. Platforms, or online marketplaces, are particularly well suited to benefit from this type of hybrid work arrangement, and therefore, they have been advancing much of the conversation around portable benefits. Other employers would be wise to not allow one company, or one industry, to rewrite such an important, and impactful, area of labor and employment law.
- The industry must continue to engage in the D.C. tipped wage conversation. It’s an important proof point on the impact of the elimination of the tipped wage and will immediately impact debate in neighboring Maryland (much of which actually resides in the D.C. media market).