Monday, June 20, 2016

Philly Passes "Sugar-Sweetened Beverage Tax"

Last week, Philadelphia's City Council passed a new law taxing sugar-sweetened beverages.  Here are some FAQs:
 
What is a sugar-sweetened beverage?  Examples include soda, non-100% fruit drinks, sports drinks, flavored water, energy drinks, pre-sweetened coffee or tea, and non-alcoholic beverages intended to be mixed into an alcoholic drink.  The new law contains an ingredient-based definition.
 
Are there exclusions from the tax?  Yes, exclusions include, among other things, baby formula, any product, more than 50% of which, by volume, is milk, and any syrup or other concentrate that the customer combines with other ingredients to create a beverage.
 
How much is the tax?  The tax is one and one-half cents per fluid ounce for sugar-sweetened beverages. 
 
How is the tax imposed?  The tax is imposed on each of the following:  (a) the supply of any sugar-sweetened beverage to a dealer; (b) the acquisition of any sugar-sweetened beverage by a dealer; (c) the delivery to a dealer in the City of any sugar-sweetened beverage; and (e) the transport of any sugar-sweetened beverage into the City by a dealer.  The tax is imposed only when the supply, acquisition, delivery or transport is for the purpose of the dealer's holding out for retail sale within the City the sugar-sweetened beverage or any beverage produced therefrom.
 
How does it work?  The new law defines a "dealer" as any person engaged in the business of selling sugar-sweetened beverages for retails sale within the City, including restaurants, retail stores, street vendors, owners and operators of vending machines, and distributors who engage in retail sales.  The law defines a "distributor" as any person who supplies sugar-sweetened beverages to a dealer.
 
Distributors must register with the City, and dealers must notify distributors that the dealers are subject to the new law through a sale for the purpose of resale exemption certificate.  The tax is paid to the City by the registered distributor, and the dealer is not liable to the City for payment of the tax as long as the registered distributor has received the proper notification from the dealer.
 
Are waivers available?  Yes, the City retains discretion to grant a waiver from the tax upon a showing of extraordinary circumstances.
 
Are there penalties for noncompliance?  Yes, a violation is a Class II offense, and a repeat violation within a twenty-four month period subjects the offender to suspension of his or her commercial activity license.
 
When is the new law effective?  January 1, 2017.

Wednesday, June 15, 2016

Fifth Circuit Finds Employer Violated FLSA through Unlawful Credit Card Tip Deductions

Most hospitality employers that take the tip credit and accept credit card payments for tips for tipped employees offset a particular amount, usually a percentage, to recover direct fees charged by the credit card companies.  These direct fees, referred to as  "credit card issuer fees," include swipe fees, charge backs, void fees, and manual-entry fees.
 
In a 2006 Wage and Hour Division Opinion Letter, the United States Department of Labor opined that employers are permitted to deduct an average offset for credit card issuer fees as long as "the employer reduces the amount of credit card tips paid to the employee by an amount no greater than the amount charged to the employer by the credit card company."
 
In a decision issued yesterday, the Fifth Circuit agreed that a restaurant employer violated the Fair Labor Standards Act (FLSA) when it deducted and retained 3.25% of its tipped employees' credit card tips because the deduction exceeded the direct costs of collecting credit card tips for those employees.  Steele v. Leasing Enterprises, Ltd., No. 15-20139 (5th Cir. June 14, 2016).   http://www.ca5.uscourts.gov/electronic-case-filing/case-information/current-opinions.
 
In Steele, the employer chose to pay its servers their charged tips in cash on a daily basis, and arranged for armored vehicles to deliver cash to its restaurants three times per week.  The employer's 3.25% deduction from the tipped employees' credit card tips included deductions for the credit card issuer fees, as well as for the cash delivery expenses. 
 
Pursuant to the FLSA, an employer can only claim a tip credit if all tips received by a tipped employee are retained by the tipped employee, with an exception that is not relevant to the case.  The issue in Steele was whether the employer violated the tip retention requirement when it offset credit card tips to recover costs that exceeded the credit card issuer fees.
 
The employer claimed the credit card issuer fees and expenses for cash delivery services always exceeded the 3.25% offset amount, although in nine individual restaurant years, the offset did not exceed these costs.  It also claimed it could maintain the offset and still retain the tip credit.
 
Agreeing with the District Court that the employer violated the FLSA, the Fifth Circuit noted that credit card fees are a compulsory cost of collecting credit card tips, and as a result, an employer may offset credit card tips for credit card issuer fees without running afoul of the employee tip retention requirement. 
 
In contrast, the employer's cash delivery system was a business decision, and not a fee directly attributable to its cost of dealing in credit, and was therefore unlawful.  Put succinctly, "an employer only has a legal right to deduct those costs that are required to make such a collection."   Allowing the employer to offset employees' tips to cover discretionary costs of cash delivery would conflict with the requirement that all tips received by such employees must be maintained by the employees for the employer to retain the tip credit.
 
Interestingly, the Court left some ambiguity because it determined it was unnecessary to opine whether any costs, other than the credit card issuer fees, associated with collecting credit card tips could ever be deducted by an employer.
 
 

Monday, June 13, 2016

Fifth Circuit Upholds NLRB's Quickie Election Rules

In an opinion issued on Friday, the Fifth Circuit agreed with a decision from the United States District Court for the Western District of Texas finding that the National Labor Relations Board's (NLRB's) rules amending the procedures for determining whether a majority of employees wish to be represented by a labor organization for purposes of collective bargaining did not violate the National Labor Relations Act (NLRA) or the Administrative Procedure Act.  A copy of the opinion can be found on the Fifth Circuit's website: http://www.ca5.uscourts.gov/electronic-case-filing/case-information/current-opinions.
 
Among other changes, the new rules: (1) allow for employees to take a vote on union representation as soon as eleven days after a petition for representation is filed; (2) defer employer challenges to voter eligibility issues until after an election is held; (3) remove the standard, twenty-five day delay that normally occurs between the time a regional director directs an election and the actual election; and (4) require the expanded disclosure of employee contact information.  The new rules are often referred to as the "quickie election" rules.
 
In the underlying lawsuit, several Texas-based trade and advocacy associations representing construction employers and small business owners brought a facial challenge to enjoin enforcement of the quickie election rules. The facial challenge standard is high, and required the business entities to establish that no set of circumstances exist under which the new rules would be valid. 
 
The District Court agreed with the Board that the standard was not met.
 
In its decision affirming the District Court's decision, the Fifth Circuit noted that the NLRA gives the Board authority to resolve questions of representation, and sets forth basic steps for that process, as well as authority to proscribe rules for processing election petitions.  The Court squarely rejected arguments that the rule changes impermissibly restricted the scope of the pre-election hearing, and that the new rules requiring expanded disclosure of employee contact information conflicted with federal privacy law. It also rejected the argument that the rules interfere with protected speech during election campaigns.
 
In short, the Fifth Circuit now joins the United States District Court for the District of Columbia in upholding the NLRB's quickie election rules.
 

Wednesday, June 8, 2016

New Final Rules, Publications, and Fines---Are you Keeping up with the EEOC?

The Equal Employment Opportunity Commission (EEOC) has been busy over the past few weeks.  Here are the highlights of its latest activities:

1.  Issuance of Final Rules on Employer Wellness Programs.  If you offer employees a voluntary wellness program that's part of a group health plan, you'll want to review the final rules just issued, which, among other things, cap incentives an employer can offer to employees who participate.

2.  Publication on "Employer-Provided Leave and the Americans with Disabilities Act."  In this document, the EEOC provides general information to employers and employees regarding its position on when and how leave must be granted for reasons related to an employee's disability.  It also inclues a discussion related to the interactive process, maximum leave policies, and reassignment. Of interest is the EEOC's discussion related to assessing whether an undue hardship will prevent an employer from granting leave as an accommodation.
 
3.  Increase in Penalties for Notice Posting Violations.  The EEOC increased the maximum penalty for employers that violate notice posting provisions related to Title VII, the ADA, and GINA from $210 per violation to $525 per violation. Free copies of the required posters are available on the EEOC's website.

Employers can find additional information related to these topics at www.eeoc.gov.

Monday, June 6, 2016

Battle of the Bathrooms---An Update on the Transgender Bathroom Fight

The battle over whether student privacy rights trump a transgender student's right to use the bathroom that corresponds to the sex with which he or she identifies continues, and two new developments move the issue closer to a possible review by the Supreme Court.
 
First, at the end of May, and on behalf of the State of Texas, Texas Attorney General Ken Paxton filed a lawsuit against the Obama Administration challenging the Administration's directive to allow transgender students to use the bathroom that matches their gender identity.  Alabama, Arizona, Georgia, Louisiana, Maine, Oklahoma, Tennessee, Utah, West Virginia, and Wisconsin joined in the lawsuit.  The suit is pending in the Northern District of Texas, Wichita Falls Division.  All of the plaintiffs seeks declaratory and injunctive relief.
 
Second, last week, the Fourth Circuit denied a rehearing request in Grimm v. Gloucester County School Board, No. 4:15-cv54, in the United States District Court, Eastern District of Virginia, Newport News Division.  In Grimm, a three judge panel previously ruled that prohibiting a transgender student from using the boys' bathroom violated Title IX of the Education Code.  Based on the rehearing denial, the prior decision remains in place.
 
Opponents of the Administration's directive have repeatedly urged that the directive leaves girls vulnerable to male predators in female restrooms.  Interestingly, in the Grimm case, Grimm was born a female but identifies as a male, and sued to use the boys' bathroom.  Little if anything has been said by opponents about the potential for female predators in male bathrooms.