LAW-Household Workers Law

The following information is used for educational purposes only.



Household Workers Law


Philip K. Davidoff

New York Law Journal

10-24-2011


Two primary laws currently apply to domestic employees in New York: the federal Fair Labor Standards Act (FLSA), 29 U.S.C. §201 et seq. and the New York Labor Law's wage and hour provisions.1 These applicable wage and hour laws, including the newly implemented domestic workers law, require families to act like small businesses (i.e., companies) in every material respect. This is a difficult concept for many families employing domestic workers to come to grips with. However, it is best for lawyers to share with clients the reality of these laws at the outset of an employment relationship, before a lawsuit is filed.

Application of Laws

Under the FLSA and New York's wage and hour laws, many families are exposed to substantial financial risk should their relationships with nannies, housekeepers, chefs, and other household workers end badly. The difficulties often stem, not from what a worker is paid, but how s/he is paid. For example, families often arrange to pay domestic workers weekly salaries or daily rates, in some cases in cash "off the books." This can lead to trouble even for a family that pays its household help far more than the minimum wages required by these laws.

While the FLSA and New York Labor Law's wage and hour provisions are in some respects overlapping, they are not identical. New York law is more favorable to domestic workers in certain important respects.

Daily Versus Live-In Domestic Workers. The FLSA and New York Labor Law's wage and hour provisions both generally consider domestic workers who do not live in the home of their employers to be "nonexempt" employees. This means that they must be paid at least the minimum wage (currently $7.25 per hour) and overtime pay at time-and-one-half their regular hourly rate for all hours worked over 40 hours within a seven-day workweek.

By contrast, the FLSA provides that "live-in" domestic workers are "exempt" from its overtime, but not minimum wage, provisions. Meaning that, under the FLSA, live-in workers are entitled to at least the minimum wage for all hours worked. For example, a live-in domestic worker who works or is on call for 80 hours per week must be paid at least $7.25 per hour for 80 hours of work, or at least $580 per week.

Importantly, however, while live-in domestic workers are exempt from the FLSA's overtime provisions, they are not (and have not been) exempt from New York's overtime requirements. Under New York Labor law's wage and hour provisions, live-in domestic workers have until recently been entitled to overtime pay at a rate of at least one-and-one-half times the basic minimum wage for any hours worked over 44 hours. With the enactment last year of the Domestic Workers' Bill of Rights, New York has, among other things, increased the overtime rate of pay for live-in domestic workers to one-and-one-half times the employee's regular rate of pay for all hours worked over 44.

Some Illustrative Scenarios. Let's take the case of a domestic worker who lives outside of the employer's home and is paid a daily rate for the work she performs. The law generally presumes that if an employee is paid a flat sum for a day's work, without regard to the number of hours worked in the day, the employee's regular rate of pay is determined by totaling all the sums received at such day rates in the workweek and dividing by the total hours actually worked.

Thus, if an employee works 12 hours a day, five days a week (i.e., 60 hours) and is paid $100 per day, the employee's regular rate is $8.33 an hour. By law, the employee is then entitled to an extra half-time pay at this rate for all hours worked in excess of 40 in the workweek (i.e., $4.165 x 20 hours = $83.30 in weekly overtime pay). If an employee has worked and been paid a daily rate without receiving this additional overtime pay, the employer has not complied with applicable law. Over a three-year period (or longer), the employer's potential exposure can add up quickly (e.g., $83.30 x 52 weeks x 3 years = $12,995, exclusive of other damages, fees, etc.).

Many families are unaware of the law's intricacies and pay only what they believe is an adequate daily rate, which, by their calculations, includes sufficient regular and overtime compensation. However, as illustrated above, this approach may not satisfy applicable law. Indeed, it matters not that the employee is "well paid" and receives compensation well in excess of statutory minimums. Unless the worker is paid "properly," the employer faces potential legal exposure.

Let's examine a similar scenario: A non-live-in domestic employee receives a weekly salary of $500. The employee's regular hourly rate, on which overtime pay must be based, is calculated by dividing the salary by the number of hours it is intended to cover. This seemingly straightforward proposition can again present several challenges to unsuspecting families.

First, without a written record of the parties' understanding, it could prove difficult to establish how many hours of work the employee's weekly salary was intended to cover. Did the parties intend that it cover 35 hours of work a week? Sixty hours? All hours of work? As interpreted by many courts, a fixed salary will not be considered to include an overtime component in the absence of an "express agreement." While such an agreement need not necessarily be in writing, certainly if this issue was never specifically raised or discussed, there is no express agreement.

Compounding these already difficult issues, many families employing domestic workers pay their employees in cash "off the books," thereby failing to adequately document their workers' hours and compensation to ensure compliance with law. Indeed, poor time tracking, errors in overtime calculations, and improper deductions from pay are all common employer mistakes. Of course, paying employees "off the books" does not absolve families of their statutory minimum wage, overtime, and recordkeeping obligations; it merely makes an already difficult compliance situation worse. It is the employer's legal obligation to maintain appropriate records of hours worked and wages paid. To the extent the employer maintains inadequate records or, as is often the case, no records at all, the employee's estimate of the amount of overtime worked will suffice to satisfy at least the employee's initial legal burden.

Obviously there is much room for misunderstanding, exaggeration, mischaracterization, and outright fraud concerning hours worked and pay rates that can occur under these circumstances. When disputes arise, employers and their domestic workers often diverge significantly when it comes to the number of hours alleged to have been worked and the amount of pay received. It is not uncommon for household workers to claim to have worked 12 hours a day or more for five or six days a week over the course of years.

In the absence of a settlement, such factual disputes ordinarily can only be settled by a jury after trial, and the cost of getting to that point in a lawsuit for a family will undoubtedly be substantial. Moreover, it cannot be overlooked that juries are often sympathetic to domestic workers when deciding such factual disputes.

So, let's return to our non-live-in household worker who is paid $500 per week, and let's assume the employee's salary is paid in cash for a five-day work week. If the parties have not agreed (or even discussed) that this sum is intended to cover all hours worked, courts generally presume that the $500 salary merely was intended to cover a 40 hour work week. The employee's regular rate of pay is therefore $12.50 per hour. Her overtime rate would be $18.75 per hour. If the employee later claims to have worked an average of 60 hours per week, the employer could potentially be facing liability of $375 per week in alleged unpaid overtime (i.e., $18.75 per hour x 20 hours). Again, over a three-year period, this could add up to approximately $58,500 in unpaid overtime alone.

Even if the parties clearly understood at the time of hire that the employee's fixed salary was intended to cover all hours worked in a given work week, the employer could still be liable for unpaid overtime at a "half-time" overtime rate for all hours worked over 40. This is because under such circumstances the law recognizes that an employee's salary is intended to compensate the employee on a "straight time" basis for all hours worked (i.e., 60 hours). The employee is then entitled to an additional one-half times his or her regular rate of pay for all hours worked over 40, or $125 per week ($6.25 x 20 hours). Over a three-year period, this could mean up to $19,500 in potential unpaid overtime compensation alone.

Statute of Limitations

As if the foregoing scenarios were not frightening enough, they may just be the tip of the iceberg when one considers that New York Labor Law's wage and hour provisions allow employees to recover unpaid wages for a period of up to six years (as distinguished from the FLSA's potential three-year statute of limitations). Moreover, both federal and New York labor laws permit recovery of liquidated damages (e.g., double damages), attorney fees, and other fines and penalties. Clearly, the potential monetary exposure for families facing such claims is substantial.

While claims by domestic workers often are quietly settled, either before or after a suit has been commenced, reports periodically surface involving high-profile individuals that illustrate some of the potential risks. For example, it was recently reported that actor Robert DeNiro and his wife settled a claim with their former nanny for $30,000 in alleged unpaid overtime. The nanny had been employed for only a nine-month period in 2006-2007.2 Similarly, Daniel Snyder, owner of the Washington Redskins, was ordered in 2007 to pay his former nanny more than $44,000 in unpaid overtime. This was in addition to the $162,000 she reportedly was paid during that same period, from April 2003 to November 2004.3 Countless other cases involving less prominent employers have been settled or adjudicated for similar sums and more.

Workers' Bill of Rights

While New York's Domestic Workers' Bill of Rights provides employees with significant new wage and hour rights, its expansive provisions are not limited solely to increased overtime compensation. The new law sets additional obligations for employers that lawyers advising clients should be aware of, including, but not limited to:

• Domestic workers' pay must be distributed weekly;

• Overtime pay must be calculated and paid at time-and-one-half the domestic employee's regular rate of pay for every hour worked in excess of 40 for the week. If the worker lives in the employer's home, overtime compensation must be paid after 44 hours;

• At the time of hire and on or before Feb. 1 each succeeding year, employers must provide domestic workers written notice of their hours of work, and regular and overtime rates of pay, and set their regular paydays, as well as provide their policies on sick leave, vacation, personal leave, and holidays. Such notices must be written in both English and the employee's primary language (if other than English). A signed and dated acknowledgement of receipt of such notices is required and must be kept by the employer for at least six years;

• Workers are entitled to 24 hours of rest every seven days, or overtime pay if the worker agrees to work on her day of rest;

• After one year of work for the same employer, employees are entitled to three paid days of rest each year. Although this new requirement hardly seems significant, it represents the first time in the state's history that any employee is entitled to paid time off as a matter of law and creates a precedent for similar legislation in the future affecting other employees;

• Certain anti-discrimination/harassment protections under the New York State Human Rights Law now apply to domestic workers. For instance, the law protects workers from certain forms of harassment based on gender, race, religion, or national origin and prohibits retaliation for complaining of such harassment;

• When a household employee works 40 hours or more per week or lives on the employer's premises, the employer is subject to the Workers' Compensation Law and Disability Law. The employer is required to purchase insurance from New York state or through a private insurance carrier; and

• Household employers are required to post a notice of domestic employees' rights in their homes in a place where such notices can be seen by their workers.

Preventative Steps

Given the potential risks involved, what should lawyers suggest families do to minimize their exposure to FLSA claims by current or former household staff? Lawyers should advise families to:

• Use FLSA/New York compliant work agreements. Make sure that the household worker's compensation is stated in hourly terms. For example, if the employee's agreed upon weekly compensation will be $750 (gross) for 48 hours of work per week, it should be reflected in an agreement as a (gross) hourly wage of $14.43 per hour for 40 hours of work, and hours worked in excess of 40 per week are compensated at $21.65 (gross) per hour. It is of equal importance that employers of domestic workers specifically address any time(s) during the workday that the employee is not required to perform services for the employer and is free to leave the employer's premises;

• At the time of hire and each year thereafter on or before Feb. 1, provide domestic workers with written notice of hours of work, regular and overtime rates of pay, their regular payday, sick leave, vacation, personal leave, and holidays;

• Maintain accurate, contemporaneous time records. At the end of every week, tally up the hours worked and have the worker sign off on them. Keep these records in a secure place for six years;

• Establish eight hours as a legal day of work; and

• Pay overtime compensation when it is due.

Conclusion

Compliance with the laws governing employment of domestic workers can be a complex task for families. Lawyers must assist household employers to essentially operate as small businesses—tracking hours, maintaining payroll records, and complying with laws that are sometimes complex in their application. While household employers can have a very difficult time defending wage and hour lawsuits, lawyers can advise household employers how to avoid very unpleasant and costly disputes in the future.

Philip K. Davidoff is a partner at Ford & Harrison in New York City.

Endnotes:

1. See New York Labor Law §170 (Hours of Labor for Domestic Workers), §190 et seq. (Payment of Wages), §650 et seq. (New York Minimum Wage Act); 12 NYCRR §142 et seq.; (Minimum Wage Order for Miscellaneous Industries and Occupations).

2. "Robert DeNiro, Grace Hightower stiffed nanny Alexis Barry $30,000 according to lawsuit." Daily News: Jan. 20, 2011.

3. "An Overtime Loss for Redskins Boss." The Washington Post: March 14, 2007.







Copyright 2011. ALM Media Properties, LLC. All rights reserved.