Newsletter December 2015

Newsletter December 2015


 

NEW REGULATIONS PROTECTING NEW YORK NAIL SALON WORKERS ARE UPHELD

Hyderally & Associates P.C.December 2015 Newsletter

A New York State Judge dismissed a lawsuit earlier this month challenging the validity of new regulations designed to protect workers in the nail salon industry. The lawsuit sought to challenge regulations that were enacted by New York State Governor Andrew M. Cuomo after a New York Times exposé uncovered the rampant exploitation of employees in the nail salon industry.

Two trade associations – the Korean American Nail Salon Association of New York and the Chinese Nail Salon Association of East America – filed the lawsuit in September 2015 in New York State Supreme Court in Albany against Governor Cuomo and the State of New York. See Katie Reilly, New York nail salon groups sue governor over new regulations, Reuters.com (Sept. 17, 2015), available at http://www.reuters.com/article/usa-new-york-nails-idUSL1N11N3D620150917. The lawsuit focused on a regulation enacted by Governor Cuomo that requires nail salons to obtain a wage bond or insurance to protect against business liabilities, including unpaid wages. The plaintiffs alleged that the regulation discriminates against the small-business owners of nail salons, who are predominantly Asian-American. They also argued that the required bonds are not readily available to the salon owners and the thus, the requirement will cause thousands of salons to fail financially and close down.

In an opinion dated December 1, 2015, Justice Michael H. Melkonian dismissed the lawsuit. Justice Melkonian wrote that the state had “sufficiently demonstrated that nail salon workers are being deprived of legally due wages and that immediate adoption” of the regulation “was necessary for the preservation of the public health, safety or general welfare of nail salon workers.” See Elizabeth A. Harris, New York Court Dismisses Challenge to Nail Salon Wage Protections, The New York Times, (Dec. 8, 2015), available at http://www.nytimes.com/2015/12/09/nyregion/new-york-court-dismisses-challenge-to-nail-salon-wage-protections.html?_r=1.

Cuomo enacted the regulations in July 2015 after The New York Times published a two-part series on the exploitation of New York’s nail salon workers in May 2015. See Sarah Maslin Nir, The Price of Nice Nails, The New York Times (May 7, 2015), available at http://www.nytimes.com/2015/05/10/nyregion/at-nail-salons-in-nyc-manicurists-are-underpaid-and-unprotected.html. The plight of nail salon workers has come into focus as nail salons have proliferated throughout New York since the 2000s, especially in Manhattan. Prices are low, remaining largely stagnant since the 1990s. Thus, what was once an occasional indulgence for the affluent, has become a common part of almost everyday life for many. The industry, however, has a dark side. The low-cost availability of the industry’s services, comes at the expense of its exploited workers, as the New York Times expose revealed. See Id.

The workers are often recent immigrants who do not speak or understand English. They are required to pay $100-$200, or sometimes much more before they begin working as a “training fee.” Then they work unpaid for several weeks during what is supposed to be an unofficial training period. At some indeterminate point, that is completely up to their bosses’ discretion, they begin to get paid $30-$40 per day for about 12 hours of work, which amounts to roughly between $3 and $4 dollars an hour. Those figures are woefully below the minimum wage in New York, which is $8.75. Nail salon workers are generally considered “tipped workers” under state and federal labor laws. Employers in New York are permitted to pay such workers slightly less than the state’s $8.75 minimum hourly wage, based on a calculation of how much a worker is making in tips; however, the workers get paid so little that the so-called tip calculation is virtually meaningless. They do not receive supplemental pay from their bosses, as is legally required when their day’s tips fall short of the minimum wage. Most work six or seven days a week, and do not receive an over-time wage. Additionally, their tips are often skimmed off the top by salon owners, or deducted as “punishment” for things like spilled bottles of polish.

New York has laws and regulations in place designed to protect workers: for example, the New York Wage Theft Prevention Act (WTPA), and New York State Department of Labor (DOL) regulations. The DOL regulations seek to protect the rights of private sector workers, and ensure that New York’s labor laws are being followed. The WTPA requires employers to give written notice of wage rates, payday, and allowances taken as part of the minimum wage (tips, meal and lodging deductions) to each new hire. The notice must be given both in English and in the employee's primary language (the Labor Department currently offers translations in the following languages: Spanish, Chinese, Haitian Creole, Korean, Polish and Russian). The WTPA also includes other worker protection provisions, such as stronger protections for whistleblowers and increased penalties for wage theft.

New Jersey, as well, has enacted labor laws, including the New Jersey Wage and Payment Act (“NJWPA”) and the New Jersey Wage and Hour Law (“NJWHL”) designed to protect workers. The NJWHL sets a minimum wage (currently $8.38/hr), and requires that an overtime rate be paid for hours worked in excess of 40 hours per week. The NJWPA stipulates the time, manner and mode of payment. It also prohibits the withholding of wages for illegal deductions, such as breakage, spillage and cash register shortages.

Despite the laws in place to protect workers, the nail salon industry is rife with non-compliance and the mistreatment of workers, as evidenced in the New York Times article. Unlicensed nail salons and manicurists, as well as many undocumented immigrant workers, have likely helped fuel the culture of non-compliance. The Times also touched on the serious health problems that many salon workers develop as a result of the exposure to the chemicals they work with. In response to the uncovering of the mistreatment and health risks, Governor Cuomo ordered emergency rule changes, and introduced two new measures in the state legislature. The rule changes, which took effect immediately, include a requirement that every salon obtain an insurance policy or bond that covers business liabilities, especially in the event owners are found not to have paid workers; an increase in the number of languages the licensing exam for manicurists is offered; and a clarification of the application process aimed at informing applicants that their immigration status does not affect their ability to obtain a license. Also, a so called workers’ “bill of rights” must now be posted in every salon, explaining that manicurists are entitled to earn the minimum wage regardless of their immigration status, and cannot be forced to pay a fee in exchange for a job.

On the health front, there were numerous rule changes made. The rules now make New York’s nail salon workplace-safety rules one of the strictest in the country.

The two new legislative measures proposed by Governor Cuomo are designed to help end the exploitation of the nail salon workers. The first, gives New York’s State Department the power for the first time to punish salons flouting the law, including the ability to shut unlicensed salons. It will also be able to increase fines for violations. The second is aimed at reducing the number of unlicensed manicurists, who lack the time and money to take the lengthy courses required to earn a license before beginning to work. The measure would create a new “trainee” status, which would allow manicurists to begin working in a salon while still pursuing their licenses.

With the dismissal of the lawsuit brought by the nail associations, the first test in the courts over the new laws and regulations aimed at the nail salon industry has been decided. What remains to be determined is how much of an affect Governor’s Cuomo’s actions will actually have on the rampant issues present in the nail-salon industry. The situation described in the Times article is so prevalent that it will likely take quite a while before enforcement will be achieved on a widespread level. Hopefully, the state lawmakers and regulators will not forget about the problems once the recent sting of the Times expose wears off.

By Isaac Graff and Zinnia Faruque, Esq.

 
 

UBER: IS IT ABOVE THE LAW?

Hyderally & Associates P.C.

The ubiquitous Uber transportation service has been rousing the ire of civil rights and employee advocates.

In fact, feminist icon, Gloria Steinem, recently joined the list of Uber’s critics. At a Dec. 5 holiday show for the Betty Effect, an organization that uses music to empower women through social justice, Steinem presented a “top 10” Christmas holiday list. Ranking No. 5 on the list was Steinem’s call for change at Uber, specifically she implored:

“I want Uber to stop charging for the weather – nobody, not even airlines, charge for the weather! – and I want Uber to stop refusing the disabled, and now, with 30,000 unregulated Uber cars in New York City, driving wheelchair accessible taxis out of business.”

Thus, Steinem zeroed in on some of the legal challenges currently facing Uber, which provides a technological platform connecting customers seeking transportation services with drivers, who Uber says are so-called “freelance” service providers. Uber is but one example of a growing sub-sector within the U.S. and international economies, often referred to as the “freelance” or “sharing” economy. Recent law suits, however, have challenged the assumption that Uber drivers are “freelancers,” and instead, have argued that companies like Uber should be considered employers/service providers under the law, and therefore, subject to the same laws that currently regulate employers/service providers, including employment discrimination laws, such as Title VII and the Americans with Disabilities Act (“ADA”).

Thus, law suits have been brought against Uber on two fronts: one, by disabled customers who have been denied accommodation by Uber drivers, and, two, by drivers seeking to be recognized as employees of Uber and not independent contractors. Suits have been filed in California, Texas and Arizona alleging that Uber has failed to comply with ADA mandates regarding the accommodation of blind and wheelchair bound passengers. Uber has argued in response that they are not transportation providers and therefore, not subject to the ADA. The drivers have filed class-action suits in California courts demanding benefits afforded to employees under the law. The issue in both cases hinges on one central issue: Is Uber merely a software platform that connects customers seeking transportation services with available, independent service providers, or should it be considered the provider of the actual service? If Uber is the provider of the service, it would be subject to the ADA and the drivers would be its employees.

Disability rights activists have argued that Uber has managed to evade regulation by operating in this gray area, hovering between being a software versus a transportation company. They have urged the courts to issue a decision clearly applying the ADA and similar state discrimination laws to Uber. Additionally, more than a dozen states have introduced acts aimed at regulating Uber like transportation services into their state legislatures.

The outcome of the drivers’ suit could have strong ramifications on the future of this freelance or sharing economy. Companies providing services similar to Uber currently exist in a variety of industries, including home cleaning, grocery shopping/delivery and construction. Many have thought that the proliferation of these freelance service providers would continue exponentially, but their future may be affected by the outcome of these recent law suits. The start-up and operational costs of Uber, and companies like it, will rise dramatically if its drivers are deemed employees. One New York City-based cleaning service said that it transitioned its workers from independent contractor status to full employee status, and ended up with a 40% increase in labor costs, according to a March 16, 2015 CNBC article. See Kate Rogers, What the Uber, Lyft lawsuits mean for the US economy, CNBC.com, (March 16, 2015), available at http://www.cnbc.com/2015/03/16/what-the-uber-lyft-lawsuits-mean-for-the-us-economy.html. In a booming industry, where start-ups are valued in the millions, such a dramatic increase in labor costs could put the financial solvency of many companies at risk. See Id.

Additionally, if companies like Uber are deemed employers, they would fall under the jurisdiction of employment discrimination laws, such as Title VII and the ADA, which would increase compliance costs and potential liability in lawsuits.

According to a September 2014 study by the advocacy group the Freelancers Union and Elance-oDesk, 34% of the country’s entire workforce was freelancing at that point. Id. A court decision that significantly impacts the freelance economy, can no longer be said to impact only a fringe sector of the economy. While the decisions will only be binding in California, they will set a legal precedent and their outcome bears watching.

By Isaac Graff and Zinnia Faruque, Esq.

 
 

AN UBER CLASS ACTION LAWSUIT IN FOCUS: Douglas O’ Connor et al v. Uber Technologies, Inc.

Hyderally & Associates P.C.

In the preceding article, we touched on a class-action lawsuit, Douglas O'Connor et al v. Uber Technologies Inc., U.S. District Court, Northern District of California, No. 13-3826, filed by Uber drivers against Uber. The drivers contend that they are employees of Uber and thus entitled to reimbursement for expenses, such as gasoline and vehicle maintenance . The suit hinges on the central underlying issue of whether Uber drivers should be considered employees of Uber under the law, rather than independent contractors, the disposition of which, will likely have far-reaching implications for the so-called “freelance” or “sharing” economy’s basic business model.

On September 1, 2015, US District Judge Edward Chen in the Northern District of California granted the Uber drivers class certification, allowing other drivers in California to join the lawsuit against Uber. Uber had contested the certification, arguing that the drivers could not be certified as a class because there is no such thing as a “typical” Uber driver, as there are significant differences in how various drivers use Uber’s platform.

Uber continued their argument, filing a request with the U.S. Court of Appeals for the Ninth Circuit in San Francisco, CA, for permission to appeal Judge Chen’s decision certifying Uber drivers as a class immediately, before the case is litigated on its merits. On November 17, 2015, the Ninth Circuit denied Uber’s request, which means that Uber will have to wait until after the case is decided in the lower district court before their appeal will be heard.

The class certification is significant because class-action status likely increases the potential damages award that the plaintiffs may receive and thus gives them more leverage in settlement negotiations. One important caveat regarding the class certification is that Judge Chen specified that Uber drivers who have worked for the service since May 2014 must specifically opt out of an arbitration agreement in order to join the class and sue the company. According to Uber, that means only a tiny fraction of a potential 160,000 California drivers are eligible to be class members. See Dan Levine, In U.S. driver lawsuit, Uber must live with class action order for now, Reuters.com (November 17, 2015).

The trial is scheduled for June 2016. Stay tuned for further updates on the case, which figures to have significant ramifications for Uber and the freelance economy in general.

By Isaac Graff and Zinnia Faruque, Esq.

 

These articles are for informational purposes only. They do not constitute legal advice, and may not reasonably be relied upon as such. If you face a legal issue, you should consult a qualified attorney for independent legal advice with regard to your particular set of facts. This newsletter may constitute attorney advertising. This newsletter is not intended to communicate with anyone in a state or other jurisdiction where such a newsletter may fail to comply with all laws and ethical rules of that state of jurisdiction.

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