ProView Standard: Michelle’s Law, Starbucks Tipping Case, Summer Employment of Minors

Michelle’s Law (Public Law 110-381)
California Court of Appeal Reverses $105 Million Judgment in Starbucks Case and Clarifies Permissible Tip-Allocation Practices
FMLA Time Off to Care for Family Members
Rules Covering Summer Employment of Minors
Men: Why You Need a Checkup

June 2009

Michelle’s Law (Public Law 110-381)

CA SB 1168 – Health Care Coverage: Dependent Children (Chapter 390)

Former President Bush signed Michelle’s Law on October 9, 2008. Under Michelle’s Law, if a group health plan or insurer offers coverage to dependents enrolled in a postsecondary educational institution, coverage must continue for one year while the dependent is on a medically-certified leave of absence due to a serious illness or injury (or when coverage would otherwise end under the terms of the plan, whichever is earliest).

These provisions apply with respect to plan years beginning on or after one year after the date of enactment of Michelle’s Law and to medically-necessary leaves of absence beginning during such plan years; thus, the law will apply to plan years beginning on or after October 9, 2009. Any notice the plan provides requiring certificate of student status must include a description of this law. Michelle's Law will apply to both fully insured and self-funded plans.

In California, the state passed legislation last fall with an effective date of January 1, 2009--SB 1168: Health Care Coverage: Dependent Children (Chapter 390)--which is the state's equivalent of Michelle's Law. There is no delayed effective date for this law, which applies to HMOs and health insurers, but not self-funded plans. This bill provides that if a health care service plan or insurance policy provides coverage for a dependent child who is over 18 years of age and enrolled full-time at a secondary or postsecondary educational institution, that coverage shall not terminate, for a period not to exceed 12 months or until the date on which the coverage is scheduled to terminate pursuant to the terms and conditions of the policy, whichever comes first, if the dependent child takes a medical leave of absence from school. Certification of the need for the leave must be provided within specified time periods.

Employer’s Action Steps for Michelle's Law:

As of the effective date of the law as applied to your plan, ensure that the plan terms are consistent with Michelle’s Law, and update the SPD and plan materials (and perhaps the employee handbook) as necessary
If the plan requires certification of student status, update the forms used to include a description of Michelle’s Law before the effective date
Communicate with all members of your HR and/or benefits department so that they can respond when questions arise
Coordinate implementation with plan administrator or insurer to ensure that the changes can and will be implemented and that there are procedures in place for handling requests for continued coverage and receipt of medical certifications

Employer’s Action Steps for CA SB 1168:

Confirm with the carrier/HMO as to whether it will provide updated certificate booklets or evidences of coverage, and that the new law is being implemented and communicated to participants and beneficiaries
Update wrap SPDs and other plan materials (perhaps including employee handbooks) to ensure consistency with the terms of SB 1168
Communicate with all members of the HR/benefits department so that they can respond when questions arise
To the extent any administration is provided in-house or through vendors other than the carrier/HMO, coordinate implementation to ensure SB 1168 is being implemented and that there are procedures in place for handling requests for continued coverage and receipt of medical certifications

California Court of Appeal Reverses $105 Million Judgment in Starbucks Case and Clarifies Permissible Tip-Allocation Practices

The California Court of Appeal has issued an important decision that has significant implications for California employers that have tip-sharing arrangements for their employees. In Chau v. Starbucks Corp., 2009 WL 1522708 (Cal. Ct. App. Jun. 2, 2009), the court held that an employer can allow employees who have both supervisory and customer service duties to receive a portion of the tips that are left by patrons in collective tip boxes. The court further held that customers who place tips in a collective tip box (rather than giving the tip directly to a specific employee) intend their gratuity to be distributed among all members of the team that provided customer service to them, including employees who may have some supervisory duties. As a result, the San Diego trial court’s judgment granting over $105 million in restitution to a class of more than 100,000 current and former Starbucks coffee baristas has been overturned.

Bitter Barista Steamed at Having to Share Tips with “Supervisors”

San Diego area barista, Jou Chau, filed a class action complaint against Starbucks on behalf of all current and former baristas in California. Chau alleged that Starbucks impermissibly allowed its shift supervisors to share in employee tips that usually are reserved for non-management employees under California law. Although Starbucks classified shift supervisors as nonexempt customer service employees and paid them on an hourly basis, Chau argued that shift supervisors were in fact “agents” of management who should not be allowed to receive any portion of the customer tips that were left in collective tip boxes. Starbucks countered that shift supervisors were not members of management because they had limited supervisory responsibilities and spent 90 percent or more of their working time serving customers and performing the exact same tasks as baristas. Significantly, neither the store managers nor assistant managers shared in the tips. After completion of a bench trial, the San Diego Superior Court ruled in Chau’s favor and ordered Starbucks to pay its baristas $86.7 million (plus 7 percent interest) as restitution for tips that had been improperly distributed to shift supervisors.

Tip-Allocation Held Permissible where Customer Intends to Tip the Entire Service “Team”

The California Court of Appeal reversed the judgment that had been rendered in favor of the plaintiff class. The court noted that, under California law, employers are allowed to create “tip pools” in which employees share and divide among themselves customer gratuities left for service employees so long as employers and their agents (i.e., supervisors and managers) do not take any portion of the tips intended for a particular customer service employee. However, the Chau court found that nothing precluded customers from tipping supervisors or managers directly. Furthermore, the practice of dividing tips left in collective tip boxes does not trigger the same legal concerns, because customers who leave such tips generally intend for them to be shared by all members of the “team” who provided the customer with service, including employees who may have some supervisory responsibilities. In other words, such tips are not taken from a specific employee to whom they were directed and “pooled” for distribution to other non-service employees – instead they are merely equitably “allocated” to those employees who were a part of the service team.

Without determining whether the shift supervisors were actually “agents of the employer” and without providing a bright line rule on how significant or extensive an employee’s supervisory duties can be for purposes of tip-sharing eligibility, the Chau court held that tips left in a collective tip box could be shared with shift supervisors who were a part of the service team and whose duties were essentially indistinguishable from those of the non-supervisory employees (i.e., the baristas).

What Does This Mean For California Employers With Tip-Sharing Arrangements?

This case is good news for employers. Although the court was careful to note that its decision was limited to the facts of the case before it (in which the “supervisory” employees at issue did not have the ability to hire, fire, promote or discipline employees and were generally engaged in the exact same types of customer service activities as non-supervisory employees), certain aspects of the Chau decision provide guidance that employers should be able to rely upon in implementing tip-sharing arrangements. Where a tip is given to a specific employee, any redistribution of that tip is considered “tip pooling,” and it may not be shared with any supervisory employee who is not primarily engaged in the same service activities as the employee who received the tip. Where the customer puts a tip in a container intended for distribution to all employees who provided service, the tip may be distributed to any employee who provided customer service – including employees with some supervisory duties.

Note: The information in this Alert was provided to Precept by Proskauer Rose LLP. Proskauer is an international full-service law firm with over 60 employee benefits attorneys located in offices across the United States. The information in this article is not intended as legal advice nor is it intended to provide a comprehensive review of the legal matters discussed. For more information about Proskauer, please contact Peter Marathas at (617) 526-9704 or pmarathas@proskauer.com. ©2009 Proskauer Rose LLP. All rights reserved. Used with permission.

FMLA Time Off to Care for Family Members

In addition to guaranteeing leave to care for newborns and for when an employee is seriously ill, the Family and Medical Leave Act (FMLA) also allows eligible employees to take up to 12 weeks of job-protected leave to care for a spouse, child, or parent with a serious health condition. Sounds straightforward enough.

But, did you know that your employees can take FMLA leave to provide “psychological comfort” to their family members, as opposed to just physical care? And, adult children, not just minors, can be covered, too?

Find out in the eleven questions and answers below how you can manage these leaves effectively. (The FMLA also now allows employees to take up to 26 weeks of leave to care for a seriously ill or injured military servicemember. That leave is not discussed in this article and may be the subject of a future edition.)

When can an employee take leave to care for family members?

The FMLA allows eligible employees to take up to 12 weeks of leave when they are needed to care for parents, children, and spouses who have “serious health conditions” (see #6, below).

However, leave to care for a family member does not apply to the period after a family member’s death that an employee may need to take care of the estate. So, for example, in Brown v. J.C. Penney Corp., 924 F. Supp. 1158 (S.D. Fl. 1996), the court found that a serious health condition applies only to people who are alive, so the employee’s leave to care for his father’s estate was not covered by the FMLA.
Who is included as a parent? What about parents-in-law?

According to the FMLA statute, a “parent” is any person who is the biological parent of the employee or who stands, or stood, in loco parentis (in place of the parent) to the employee when the employee was a child. A person is considered “in loco parentis” if he has day-to-day responsibilities to care for and financially support a child, or in the case of an employee, who had this type of responsibility for the employee when the employee was a child. A biological or legal relationship is not necessary. Parents-in-law, however, are not included within the meaning of “parent.”
Who is included as a child?

A son or daughter who is a biological, adopted, or foster child, stepchild, legal ward, or a child of a person standing in loco parentis (in place of the parent) is covered under the FMLA. In addition, the child must be either under age 18, or, if older than 18, unable to care for himself because of a mental or physical disability (see #4, below).
Does the FMLA cover adult children?

In limited circumstances. For coverage to apply, a child must be either under age 18, or, as noted in #3, above, if older than 18, unable to care for himself because of a mental or physical disability. Though the FMLA does not define “disability” for purposes of adult children, the regulations adopt the Americans with Disabilities Act’s (ADA) definition. Accordingly, the adult child must have a disability that substantially limits a major life activity.

Further, children older than 18 will be considered incapable of self-care if they require daily active assistance or supervision with three or more “activities of daily living” (such as grooming, hygiene, dressing, and eating) or “instrumental activities of daily living” (including cooking, shopping, taking public transportation, and paying bills).

So, for example, in Bryant v. Delbar Prods, Inc., 18 F. Supp. 2d 799 (M.D. Tenn. 1998), a court found that the FMLA covered an employee’s leave to care for an adult son who was unable to care for himself when hospitalized with kidney failure. In contrast, in Cruz v. Publix Super Mkts., Inc., 428 F.3d 1379 (11th Cir. 2005), the court determined that the FMLA’s family care protections did not cover an employee taking leave to care for her adult pregnant daughter because the employee did not provide any evidence that her daughter was incapacitated by the pregnancy or incapable of self-care because of a physical or mental disability.
Does “spouse” include unmarried domestic partners?

The FMLA statute defines “spouse” as a husband or wife. The FMLA regulations also include as “spouses” common-law marriage partners in states that confer legal status to such relationships. Other same-sex or heterosexual domestic partners are not covered.
Is the definition of serious health condition the same for family members as it is for employees who are seriously ill?

Yes. A “serious health condition” is defined as “an illness, injury, impairment, or physical or mental condition that involves” either inpatient care or “continuing treatment” by a health care provider.
Can we require medical certification for these leaves?

Yes, you may require that the employee provide certification from a health care provider “in a timely manner” of the serious health condition of the spouse, child, or parent, including a statement that the employee is “needed to care for” the family member.

The revised FMLA regulations that took effect in January 2009 provided a new medical certification form for family members. Form WH-380-F is available from the Department of Labor online at www.dol.gov/esa/whd/forms/WH-380-F.pdf.
What does “needed to care for” mean?

According to the FMLA regulations, “needed to care for” may encompass both physical and psychological care. It includes situations where, for example, because of a serious health condition, the family member is unable to care for his own basic medical, hygienic, or nutritional needs or safety, or is unable to transport himself to a doctor.

The term also includes providing psychological comfort and reassurance that would be beneficial to a child, spouse, or parent with a serious health condition who is receiving inpatient or home care. So, in Scamihorn v. Gen. Truck Drivers, Local 952, 282 F.3d 1078 (9th Cir. 2002), the court found that a truck driver whose employer refused to reinstate him with full seniority after leave to help his elderly father cope with deep depression could sue for FMLA violations because there was evidence that he provided needed psychological comfort to his father. The employee moved to his father’s home at his father’s doctor’s suggestion, drove his father to counseling treatments, talked with him several hours a day, and performed household chores for him.

However, in Tellis v. Alaska Airlines, Inc., 414 F.3d 1045 (9th Cir. 2005), a court determined that, as a matter of law, providing care to a family member under the FMLA requires some actual care and presence with the family member. Accordingly, the court rejected an employee’s claim that his cross-country trip to retrieve the family car provided psychological reassurance to his pregnant wife that she would soon have reliable transportation. The court also was not convinced that his phone calls to her while traveling provided moral support and psychological comfort for purposes of the FMLA family care provisions.

An employee also will be considered as “needed to care for” those family members when making arrangements for changes in care, such as transfer of the family member to a nursing home.
Can we require employees to prove their familial relationships?

Yes, you may require them to provide reasonable documentation or a signed statement describing the nature of the relationship. The regulations state that documentation “may take the form of a simple statement from the employee,” a child’s birth certificate, or a court document.
Do employees have to take this leave all at once, or can it be taken intermittently or on a reduced work schedule?

An employee may take leave to care for a spouse, child, or parent with a serious health condition on an intermittent or reduced leave schedule without the employer’s permission when it is medically necessary. Intermittent or reduced schedule leave may be taken not only when the family member’s condition is intermittent, but also when the employee is needed intermittently, such as when care responsibilities are shared with others.

If both a husband and wife are employed by your organization, the FMLA limits their combined leave to 12 workweeks to care for a seriously ill parent. However, the combined limit does not apply if the leave is requested because of a serious health condition of a child or of the other spouse. In those situations, each spouse is entitled to a total of 12 weeks of leave.
Are there any restrictions on the amount of leave that can be taken if we employ spouses?

If both a husband and wife are employed by your organization, the FMLA limits their combined leave to 12 workweeks to care for a seriously ill parent. However, the combined limit does not apply if the leave is requested because of a serious health condition of a child or of the other spouse. In those situations, each spouse is entitled to a total of 12 weeks of leave.

Reprinted with permission from HR Matters E-Tips, copyright Personnel Policy Service, Inc., Louisville, KY, all rights reserved, the HR Policy and Employment Law Compliance Experts for over 30 years, 1-800-437-3735. Personnel Policy Service markets group legal service benefits and publishes HR information products, including the free weekly electronic newsletter, HR Matters E-Tips (www.ppspublishers.com/hrmetips.htm). This article is not intended as legal advice. Readers are encouraged to seek appropriate legal or other professional advice.

Rules Covering Summer Employment of Minors

Do you plan to hire high school students during the summer? If you do, then you must comply with the child labor provisions of the Fair Labor Standards Act (FLSA). The FLSA prohibits most minors under the age of 14 from working in any occupation and places time and duties limits on kids who are under 18.

The law is intended to ensure that children remain in school and to protect them from “oppressive” labor conditions that would endanger their health or safety. In addition, most states also put limits on what, when, and where minors can work. Find out below what the most common restrictions are for employing minors.

Oppressive Child Labor Defined

The FLSA prohibits employers from using any “oppressive child labor” in commerce, in the production of goods for commerce, or in any enterprise engaged in commerce or in the production of goods for commerce. The term “commerce” is defined to mean trade, commerce, transportation, transmission, or communication among the several states or between any state and any place outside that state.

The FLSA defines “oppressive child labor” to mean a condition of employment under which: (1) a child under age 16 is employed in any occupation; or (2) an employee who is 16 or 17 works in an occupation that the Secretary of Labor declares by order to be particularly hazardous for children between those ages, or to be detrimental to their health or well-being. However, regulations implementing the FLSA allow the employment of children ages 14 and 15 in certain industries and at times that do not interfere with their schooling.

Regulations concerning occupations that are particularly hazardous for minors ages 16 and 17 appear at 29 C.F.R. §§570.50 et seq. and include those such as coal mining, logging, and roofing. Regulations concerning the employment of minors ages 14 and 15 appear at 29 C.F.R. §§570.31 et seq. and allow this age group to work in businesses such as retail, food service, and gasoline service establishments as office and clerical workers, kitchen workers, and service station attendants.

(Note that the FLSA does allow minors of any age to deliver newspapers; perform in radio, television, movie, or theatrical productions; work in businesses owned by their parents (except in mining, manufacturing or hazardous jobs); and perform babysitting or minor chores around a private home.)

The FLSA also regulates the hours that 14- and 15-year-olds may work. Specifically, permissible work hours for 14- and 15-year-olds include:

3 hours on a school day;
18 hours in a school week;
8 hours on a non-school day (such as a Saturday);
40 hours in a non-school week (such as during vacations or the summer); and
Between 7 a.m. and 7 p.m., except from June 1 through Labor Day, when nighttime work hours are extended to 9 p.m.

The FLSA does not limit the number of hours or times of day for workers 16 years and older.

The DOL provides helpful information on child labor laws, including age restrictions, work hours, and hazardous occupations, online at www.dol.gov/dol/topic/youthlabor/index.htm.

Certificates of Age

The FLSA does not require you to have proof of a minor’s age or to have a certificate of age for a minor. However, if you do have on file an unexpired certificate of age authorized by the Administrator of the Wage and Hour Division, this certificate will show your good faith effort to comply with the FLSA minimum age requirements. In addition, you should be aware that many states specifically require these certificates.

State Child Labor Law Requirements

States also restrict the ages, hours, and occupations in which children may be employed. Many states prohibit the employment of children under a certain age during school hours and on non-school days. For example, Illinois allows children 14 and 15 to be employed for only 3 hours a day and 24 hours a week when school is in session. California allows 14- and 15-year-olds to be employed only 3 hours a day, 18 hours a week when school is in session and 40 hours a week when school is not in session, and also limits evening work hours.

State laws also may place additional restrictions on the employment of children in hazardous occupations. For example, Illinois prohibits minors under 16 years old from working in 26 occupations. In addition, most states require employers to have age certificates on file for minor employees. Accordingly, you should check with your state department of labor to determine what restrictions apply to minors.

Minimum Wage and Overtime Requirements

Another question that often arises with minor employees is whether you must pay them the minimum wage and overtime. Typically, the answer is yes, unless the minor meets certain requirements and is not considered your employee. (Note, as explained above, that 14- and 15-year-olds generally cannot work more than 40 hours even during school vacations.) According to the Department of Labor (DOL), a person may be considered a “trainee” or a student and not an employee entitled to minimum wage and overtime under the FLSA if all of the following six criteria are met:

The training the person receives is similar to that which would be given in a vocational school
The training is for the benefit of the trainee or student
The trainee or student does not displace regular employees, but works under their close supervision
The employer that provides the training does not derive any immediate advantage from the activities of the trainee or student, and on occasion its operations may be impeded
The trainee or student is not necessarily entitled to a job at the conclusion of the training period
The employer and the trainee or student understand that the trainee or student is not entitled to wages for the time spent in training

So, if the students are receiving training that benefits them, rather than the employer, and the training furthers their educational goals, the DOL typically will not consider them to be employees. Similarly, if the students receive academic credit for their work, they likely will not be considered employees. In addition, these students may be paid a stipend and still not be considered employees as long as the stipend does not exceed a reasonable estimate of the students’ expenses.

On the other hand, if the students are doing work normally performed by other employees and receive little supervision or training, and the employer gains an immediate benefit from the students’ work, they probably should be treated as employees under the FLSA.

Even if the students should be considered employees, you may be able to obtain a special certificate to hire them at wages that are lower than the minimum wage. Under the FLSA, “full-time students” employed in retail and service establishments and in agriculture may be hired for a wage that is at least 85% of the current minimum wage (now $6.55 an hour, increasing to $7.25 effective July 24, 2009). In addition, students over the age of 16 who are enrolled in an accredited school, college, or university and who are employed in an approved vocational training program may work in an occupation requiring a substantial learning period at a wage that is at least 75% of the minimum wage.

Because these requirements are complex, you may decide to pay minor interns as employees. If you want to treat them as nonemployees or pay them using the subminimum wage exceptions, you should consult with legal counsel to ensure you comply with all of the requirements.

Men: Why You Need a Checkup

By Dr. Christopher H. Coulter, Chief Medical Officer

When it comes to communicating wellness to employees, a lot of time and effort is put into educating women on the importance of regular checkups and mammograms. Often, though, we forget about educating men on the importance of regular check-ups and pre-screenings. In recognition of Men’s Health Month, now is the perfect time to remind your male employees to go get their annual physicals.

Guys don’t like going to the doctor. He or she is probably going to tell us to lose weight or to get more exercise, and sitting in an exam room in a smock just doesn’t appeal to most of us. The thought of being sick is uncomfortable, with unpleasant visions of being helpless and dependent on others. “Besides,” we think, “what do I need to see a doctor for, if I don’t feel sick?”

One good reason to go is that some of the most damaging medical conditions don’t hurt or cause symptoms. Take high blood pressure. Most men with high blood pressure don’t have symptoms until real harm has been done. Waiting until you have a heart attack, stroke, or kidney failure to find out whether you’ve had high blood pressure is not a mistake you want to spend the rest of your life regretting. Testing for high blood pressure is easy, treatment is effective, inexpensive, and painless, and controlling blood pressure prevents those complications from occurring.

What else? Detecting illness early, when it is easier to treat and before it has done you harm, will depend on your family history, what medical problems you may have had in the past, and what symptoms you may be having now. All of these are good reasons to have a checkup. Here are some others:

Cholesterol – another silent killer that is easily identified, and treatment removes the risk that it will cause heart disease or stroke
Smoking cessation – if you smoke, you know you need to quit. Your physician can help with programs and medications that can make the difference.
Diabetes – silent signs show up early as pre-diabetes, when it can be reversed. Even after being diagnosed with diabetes, taking care of it early will help prevent complications and injury.
Colorectal cancer screening – detected early, colon cancer is curable. Detected late, it is usually fatal. This is also true for other cancers, and a prime reason for periodic health checkups.

The bottom line – getting a checkup is something you can do to take charge of your own health and make sure you live a long, healthy, and active life. If your automobile deserves a periodic tune-up, don’t you?