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Legal Update - March 2020

Yogi Patel - Wednesday, March 04, 2020

Dear Valued Clients, Colleagues and Supporters: This month's newsletter will focus on: 1) Liability for Foreign LLC Owners in Wage and Hour Cases; 2) Recent Enforcement of New York City's Sick Leave Law; and 3) An Update to the Federal Joint Employer Rule.

Liability for Out-of-State LLC Owners

As of February 10, 2020, the ten largest owner members of out-of-state limited liability companies can be held liable for wage and hour violations under New York Labor Law. Previously, the law only allowed for personal liability against members of New York (domestic) LLCs. Now, members of LLCs formed out of state but doing business in New York can be held personally liable for wage and hour violations involving employees. To establish such liability, an employee must first be awarded a judgment against the LLC itself, demonstrate that it has been unpaid, and then give the LLC members advanced written notice that they may be held personally liable. Member liability is "joint and several," meaning each applicable member may be required to pay the full amount, though they may seek reimbursement from the other members.

Enforcement of NYC Sick Leave Law

In a case that has made headlines, a Chipotle employee who works in Manhattan has demonstrated the consequences for employers if they do not abide by the New York City's Paid Safe and Sick Leave Law (the "Law"). As we have previously covered, the Law entitles employees of New York City businesses with 5 or more workers to accrue up to 40 hours of paid time off for various uses, including caring for ill family members. This particular employee was fired by Chipotle for missing work to care for her sick father and pregnant daughter last fall. The employee filed a complaint with the Department of Consumer and Worker Protection in January, which resulted in the employee receiving her job back, payment for the sick leave she was entitled to, plus an additional $2,500 for her retaliatory firing. Employers should take note and ensure their leave policies are in compliance and their managers are well-trained to avoid violations and swift penalties.

Update to Federal Joint Employer Rule

Under the Fail Labor Standards Act, ("FLSA"), the main federal statute on wage and hour laws, it is possible for an employee to have multiple "employers" for the purposes of establishing violations under the FLSA. Whether an employee has more than one employer is assessed under the "joint employer" doctrine. As of March 16, 2020, the new rule regarding the joint employer doctrine as released by the Department of Labor sets forth a four-factor test in assessing whether a business is a joint employer. The rule requires looking at whether the alleged employer 1) can hire or fire the employee; 2) can supervise or control the employee's work schedule or conditions of employment to a substantial degree; 3) can determine the employee's rate or method of pay; and 4) maintains employment records. These factors are weighed together and none is dispositive alone. While this rule is very similar to the previous rule, the DOL made it clear that a second employer must actually exercise one of these factors, not just theoretically have the ability to do so. Business owners, particularly those that share resources and staff with others, are encouraged to discuss the joint employer doctrine with their counsel to fully understand their rights and obligations.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

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