By:  Kara Maciel, Adam Solander and Lindsay Smith

As the Employer Mandate compliance deadline looms for employers under the Affordable Care Act (“ACA”) and employers are closely monitoring employee hours, it is critical that employers take appropriate and lawful steps to record all hours worked by an employee.  If employers try to play games and manipulate how time records are maintained, they could find themselves in hot water under both the ACA and the Fair Labor Standards Act (“FLSA”). 

In what appears to be one of the first lawsuits challenging how hours are recorded under the ACA, an employee filed a putative collective action against Sun Holdings, LLC, a fast food franchisee.  The employee, a busboy at a Golden Corral restaurant, alleged that his managers required him to work under his real name and an alter ego to avoid paying him for all hours worked.  This set-up allegedly was designed to avoid having to pay overtime compensation under the FLSA and to count him as a full-time employee eligible to receive health benefits under the ACA.   

Accurate calculation and recording of the total number of hours worked by an employee is essential to compliance with the provisions of both the FLSA and the ACA.  Under the FLSA, an employer must pay an employee at least the minimum wage for all hours worked.  An employer must also provide overtime compensation at one and a half times the employee’s regular rate of pay for any hours worked in excess of 40 hours per week, unless that employee is classified as exempt.  Therefore, if an employer attributes some amount of time worked by one employee to an alter ego through which the employee cannot claim his time, the employee may be deprived of the overtime compensation he has earned.

Additionally, the ACA only provides benefits to employees who reach a certain amount of hours and binds employers with a certain amount of employees meeting that hour threshold.  The ACA applies to employers with 50 or more employees working 30 or more hours per week.  Only those employees working 30 hours or more per week are entitled to the health care coverage required by the ACA.  Therefore, an employee may lose the benefits to which he would otherwise be entitled if a portion of his hours worked is attributed to someone else, causing him to fall below the 30-hour minimum.  Furthermore, an employer may avoid the obligations of the ACA if it records 30 hours or more of work time for less than 50 of its employees. Although the Employer Mandate, which puts the employer-provided coverage into effect, does not kick in for large employers until January 1, 2015, applicability of the ACA depends upon the size of the affected workforce during the prior calendar year.      

A claim of this kind could be very costly for an employer because, as is the case here, such claims are often brought as collective actions.  In this case, the employee filed his claim on behalf of himself and all others similarly situated.  Although the amount of unpaid wages and liquidated damages he seeks only amounts to approximately $15,000.00, the franchisee owns roughly 400 restaurants in Texas and Florida.  Thus, a court award, or even a settlement, could be quite significant.

These allegations demonstrate the importance of correctly tracking employee hours and ensuring that an employee receives compensation and benefits in accordance with the total amount of hours worked.  Often times, this may mean training your managers as to the correct protocol for recording and compensating hours worked and monitoring to ensure managers are following that protocol. 

Importantly, this case forecasts what could be an emerging and growing area of litigation under the ACA, so employers must be ever vigilant about putting into practice protocols that ensure they are complying with the ACA and not manipulating hours to avoid the Employer Mandate’s requirements.  Considering that an analysis under the Employer Mandate’s look-back methodologies should be done this year, any changes to employees’ hours should be closely reviewed with legal counsel.  Although overtime compensation and benefits coverage can create increased financial burdens on employers, the cost of not complying can be even greater. 

Continue Reading Playing with Employees’ Hours Could Get You in Hot Water under the ACA and FLSA

Epstein Becker Green is pleased to be participating in the 2014 National HR In Hospitality Conference & Expo at the Aria Hotel in Las Vegas on April 28-30, 2014. EBG is sending two of its hospitality industry experts to represent the Firm, Kara Maciel and Jeffrey Ruzal.
Continue Reading Epstein Becker Green to Participate in the 8th Annual National HR In Hospitality Conference & Expo

Most unionized hospitality employers have collective bargaining agreements which require contributions to multiemployer pension funds. In recent years, many of these pension funds have slipped into “endangered” or even “critical” status, and employers who have exited these funds have been hit with substantial assessments of withdrawal liability. These assessments often amount to millions of dollars

In a recent Law360 article, "NLRB Social Media Push Looms Large for Hospitality Sector" (subscription required), our colleague Mark Trapp comments on the importance for unionized and non-unionized hospitality employers to review their social media policies.

Following is an excerpt:

With the National Labor Relations Board increasingly interjecting into non-union issues, hotels, restaurants and

We’d like to recommend an upcoming complimentary webinar, “Data Privacy and Security in the Hospitality Industry Webinar: Legal Strategies Amid Growing Liability Threats” (Oct. 10, 2:00 p.m. EDT), by our Epstein Becker Green colleagues Kara M. Maciel, Robert J. Hudock, Alaap B. Shah,and Adam C. Solander.
Continue Reading Oct.10: Data Privacy and Security Webinar – Legal Strategies Amid Growing Liability Threats

By: Kara M. Maciel

Many restaurants include automatic gratuities on guests’ checks with large parties to ensure servers get fair tips. This method allows the restaurant to calculate an automatic gratuity or tip into the total bill, but it takes away the customer’s discretion in choosing whether and/or how much to tip the server. As a result