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Thoughts and ideas from King & Siegel LLP
June 10, 2018 at 12:00 AM
by Julian Burns King
clear glass jar

Tip pools are common in the services industries, including among restaurant, car wash, spa, salon, casino, and other employees. Although some tip pools are legal, many are not. Watch out for these common pitfalls in employer-mandated tip pools.

WHAT'S A TIP POOL?

Your employer has a tip pool policy if you are required to place some or all of your tips into a collective pool to be redistributed to other employees. Your employer may be illegally diverting your tips if it (1) requires you to share your tips with your employer, (2) requires you to share your tips with managers or supervisors, or (3) allows your employer to take deductions from your tips. 

WHAT'S THE LEGAL BASIS FOR PROHIBITIONS ON TIP POOLS AND TIP SHARING? 

California Labor Code section 351 prohibits employers and their agents from taking any portion of an employee's tip. Specifically, "[n]o employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron . . .. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for." 

This typically means that is a customer leaves YOU a tip, the tip belongs to you: Your tips are your wages.

CAN I BE REQUIRED TO SHARE TIPS WITH OTHER EMPLOYEES?

Yes. Noting that Labor Code section 351 provides that tips belong to "the employee or employees" the tip was paid, given, or left for, a tip pool is allowed when it is clear that the patron is leaving a tip to reward multiple employees' collective service. See Leighton v. Old Heidelberg, Ltd., 219 Cal. App. 3d 1062, 1068 (1990). 

Thus, while employer-mandated tip pools are legal, to be correctly administered, the California Department of Labor requires tip pools to be "reasonable." Specifically, the Department limits tip pools to employees who personally contribute to the chain of service.

The bottom line is this: You can be required to share tips with other employees who actually provide service to the customer leaving the tip, but if your employer takes a cut of the pool for himself—or even managers or workers on other shifts—your employer may be committing wage theft.

CAN SUPERVISORS PARTICIPATE IN THE TIP POOL?

Not usually. As a general rule, employers and "agents of employers," i.e.,supervisors, are prohibited from participating in tip pools. Thus, supervisors cannot participate in a tip pool unless they provide service to customers. 

There is a limited exception for "agents" of the employer who personally provide service to patrons. Typically, this occurs when tips are left in collective “tip boxes” and where the shift supervisor also performed services for the patrons who left the tips they were allowed to share in them.

DO TIP-POOLING RULES APPLY TO MANDATORY "SERVICE CHARGES"?

It depends. State and federal regulators have taken the position that mandatory service charges are not considered "tips" or "gratuities" left for a particular employee. Accordingly, section 351 probably does not prohibit the employer from distributing mandatory service charges as they see fit, assuming the establishment is not misleading consumers as to where the charge is going. 

While service charges generally belong to the restaurant under state and federal law, numerous municipalities have enacted laws governing "service charges," particularly in the restaurant industry. For instance, Santa Monica's minimum wage ordinance specifies that "[a]n employer shall distribute all services charges in their entirety to the Employee(s) who performed services for the customers from whom the Service Charges are collected. No part of these amounts may be paid to Employees whose primary role is supervisory or managerial." Moreover, employers are also prohibited from "deduct[ing] any amount from wages due an Employee on account of a Service Charge." Depending on where you live, then, municipal law may entitle you to a share of service charges, and may prevent managers from sharing in service charge pools.

CAN MY EMPLOYER DEDUCT CREDIT CARD SURCHARGES FROM MY TIPS? 

No. The plain language of section 351 prohibits employers from taking credit card surcharges from employees' tips. If the employer chooses to allow patrons to pay tips by credit card, the employer must pay its employees the full amount of the tip indicated on the credit card slip, without deductions for credit card payment processing fees. Moreover, you're entitled to your credit card tips by the next regular payday after the patron authorized the tip. 

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Have further questions about your employer's tip-pooling and tip-deductions policies? Contact us for a free consultation.

June 5, 2018 at 5:00 AM
by Julian Burns King
group of women doing yoga

The US is the world's largest fitness market, with nearly 37,000 fitness studios or clubs and an annual growth rate of almost 5%. Revenues are growing even more rapidly and are currently estimated at $25.8 billion annually. Among fitness studios, "boutique" gyms are the fastest-growing segment.

With many fitness instructors barely scraping by, all this growth begs the question: Where is the money going? In many cases, it's pure profit. Fitness chains like SoulCycle and YogaWorks prepared their books for scrutiny by investors in advance of their high-profile IPOs. Unfortunately, complying with the labor laws doesn't always factor into the equation. The fact that some employees view fitness as a lifestyle, rather than "just" a job, also contributes to employers throughout the industry underpaying their employees and denying them their legal rights.

The consequences of widespread abuses throughout the fitness industry will only be exacerbated unless wronged employees speak up. The federal Bureau of Labor Statistics predicts that the number of fitness trainers and instructors will grow 13% before 2022. Unless companies are forced to fairly compensate their employees, they will continue to underpay and overwork their employees, and the next generation of fitness professionals will be subjected to the same routine employment law violations.

In this post, our experienced employment lawyers analyze some of the most common employment law violations in the lifestyle and fitness industry. 

(1) FAILURE TO PAY A MINIMUM WAGE FOR ALL HOURS WORKED

Many fitness and lifestyle professionals are "piece rate" employees. If you're paid by the class, session, or signup, rather than the number of minutes you spent working, you're paid on a piece rate basis. But the fact that you're paid by the class doesn't mean your employer isn't required to pay you the applicable minimum wage for all the time actually worked. Instructors at fitness studios are often required to work "floor time" or "desk time" in addition to their scheduled classes, or are required to clean up the studio, attend trainings, or review training materials. These requirements all implicate minimum wage concerns and you may have a cause of action for unpaid wages.

The short version is this: You must make a minimum wage for every hour you work. Your employer is breaking the law if you do not receive a minimum wage for all working time, including:

  • "Floor time" between training sessions or classes;
  • Desk shifts before and after training sessions or classes;
  • Cleanup times before and after training sessions or classes;
  • Mandatory training conducted for the employer's benefit;
  • Mandatory classes you are required to take at the employer's facility; and
  • Free, public classes offered by teacher trainees to new students.

In our experience, very few employers in the health and fitness industries adequately compensate junior employees for their working time. 

(2) FAILURE TO REIMBURSE FOR BUSINESS EXPENSES

California law prohibits employers from shifting their business costs onto employees by requiring employees to use their own property for the employer's benefit. Lab. Code § 2802. Fitness studios routinely violate these requirements. Are you required to get your schedule through a centralized app? Are you required to play music from your phone during class? Are you required to review training materials on your personal laptop or phone? Are you supposed to bring your own equipment to the studio? Are you required to drive your car from studio to studio in the same day? If so, you may have a claim for your employer's failure to reimburse your business expenses.

(3) VIOLATIONS OF "FORCED PATRONAGE" STATUTES

Employers cannot require or coerce employees or applicants to purchase services from the employer ("forced patronage"). Lab. Code § 450. While few employers generally violate this rule, it is routinely abused in the health and fitness industry. Many fitness chains require employees to participate in proprietary, brand-specific training beyond generally-recognized personal or group training certifications. These programs generally require applicants or employees to pay out of pocket for proprietary "certifications" that are not recognized by industry certification bodies and are not required by law. To illustrate, while your employer can require you to have NASM, ACE, or Yoga Alliance certifications, they can't require you to pay them for special branded "instructor trainings" that aren't transferrable across studio brands or throughout the industry.

Abuses of this rule are rampant--and expensive. Studio fitness chains have monetized teacher training, converting a job expense into a profit center and marketing it aggressively to consumers. But the fact that it's also marketed towards consumers doesn't mean it's not job training. If you paid for a branded training program, you may have a claim for reimbursement of your out-of-pocket costs plus penalties. We are actively investigating these claims and encourage you to contact us today. 

(4) FAILURE TO PROVIDE REST BREAKS

Non-exempt employees are entitled to rest breaks for all shifts longer than 3 1/2 hours. Rest breaks accrue at the rate of 10 minutes for each 4 hours worked. This rest break must be in the middle of the work period to the extent practicable. If your employer fails to provide authorized rest breaks, you are entitled to an extra hour of pay for each day the break was denied. This means that if you are scheduled for four straight one-hour classes without a break, your employer is liable for an hour of wages for each day without a break, plus penalties. 

(5) FAILURE TO PAY "SPLIT SHIFT" PREMIUMS

A shift split is a work schedule that is “interrupted by non-paid[,] non-working periods established by the employer, other than bona fide rest or meal periods.” 8 C.C.R. § 11020(2)(M). Employees who work a split shift are entitled to an additional one hour of pay at the generally-applicable minimum wage. Id. § 11020(4)(C). If you are scheduled for two classes in the morning and two in the evening with a two-hour break in between, you are entitled to one hour of split shift pay. 

(6) FAILURE TO PAY "REPORTING TIME" PREMIUMS

Employees who report to work and are provided with less than half the scheduled work must be paid “reporting time pay” of half the day’s scheduled work. Id.§ 11020(12). If you are required to report to work a second time in any one workday and is furnished less than 2 hours of work on the second reporting, you must be paid for two hours of work at their regular rate of pay. Id. Put simply, this means that if you report to work and half your classes have been cancelled due to under-enrollment or cancellations, you may be entitled to reporting time pay. 

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Employment law violations are pervasive in the health and fitness industry. If you are concerned that your employer is depriving you of your rights under the California Labor Code, contact King & Siegel LLP today for a free consultation.

June 2, 2018 at 5:00 AM
by Julian Burns King
group of women exercise using dumbbells

Everyone knows that gyms make it nearly impossible to terminate your membership. (It's such a well-known phenomenon that it earned its own episode of Friends!) So if abusive practices are nearly universal, there must not be any laws regulating gym memberships, right? Surprisingly, California law provides numerous protections to gym members and expressly prohibits most of the gyms' go-to sales and lock-in tactics. Here are the top eight illegal practices we've observed in consumer gym contracts. 

(1) SELLING CLASS PASSES WITH ILLEGAL EXPIRATION DATES

Retailers, including gyms, are prohibited from selling “gift cards” or “gift certificates” with expiration dates. Courts have found that prepaid class passes qualify as “gift cards” under this law, meaning that your Spin classes, Pilates lessons, and yoga sessions can't expire. Yet fitness studios continue to sell prepaid class credits that expire in as little as one week--including SoulCycle, which just paid a $10 million class action settlement challenging the very same practice. 

(2) MAKING IT IMPOSSIBLE TO GET A COPY OF YOUR CONTRACT

Gyms often make it very difficult to obtain a copy of your membership contract. This is on purpose: If you don’t have a copy of your contract, the gym is more likely to prevent you from exercising your right of cancellation. California tried to solve this problem by requiring gyms to provide you with a physical or email copy of your membership contract at the time you sign up. In fact, your entire contract is void if the gym fails to provide you with a copy of your contract—meaning you can quit at any time.

(3) REFUSING TO ALLOW YOU TO QUIT DURING A COOLING-OFF PERIOD

California law gives consumers the right to cancel any gym membership or class package within five days of purchase (or more, depending on the value of the contract). It also requires the gym to clearly inform you of this right in your membership contract in legible, bold font near your signature.  

(4) CHARGING AN EXTRA MONTH AFTER YOU QUIT

Many gym contracts require you to provide 30 days’ notice of your intent to cancel. Pretty straightforward, right? Wrong. Most gyms tack on an extra month of membership fees by charging you for one billing cycle after you provide notice of your intent to cancel. Conveniently, this additional month is rarely disclosed to consumers when they sign month-to-month membership contracts. If your gym charges you for an additional month, point to the language in the contract requiring 30 days' notice--not 30 day's notice plus any time remaining in the next billing cycle.

(5) REQUIRING IN-PERSON CANCELLATIONS

California law provides that your gym contract must contain an email address to which consumers can send notice of cancellation. But many, if not most, gyms require you to cancel in person. This is an intentional tactic to prevent you from quitting. Most gym members who want to quit do not regularly go to the gym, suggesting it is inconvenient for them; moreover, once you arrive at the gym, you'll be subjected to a sales pitch designed to prevent you from cancelling. 

(6) CHARGING UNDISCLOSED FEES

Sometimes gyms arbitrarily impose fees for "maintenance," "additional services," and other "enhancements." Even worse, some gyms charge an undisclosed "cancellation" fee in addition to extra month charged discussed in #4. If you are charged extra fees, look closely at your contract. If the gym didn't disclose the fees, they're probably illegal. 

(7) REFUSING TO ALLOW MEDICAL CANCELLATIONS OR REFUNDS

California law requires gyms to allow you to terminate your membership for medical reasons that prevent you from using the facilities. (Gyms are allowed to require a doctor's note.) If you've prepaid for services, you are entitled to a refund. So if you purchase a 20-class package at a Spin studio, and you subsequently injure your knee, you are entitled to a refund for any unused classes. 

(8) MAKING UNAUTHORIZED CHARGES OR WITHDRAWALS

Under the Electronic Funds Transfer Act, companies are prohibited from making unauthorized electronic charges (for instance, debit or credit card charges or ACH transfers). Many gym contracts authorize the gym to charge regular membership or class package fees to your credit card. But if the gym overcharges or charges you for services that don’t fall within your original contract, it may be breaking the law.

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If your gym or former gym engages in the practices discussed above, we can help! We are developing several cases against major commercial gyms and fitness chains, including OrangeTheory Fitness, YogaWorks, and Club Pilates. Contact us today with information or inquiries.

May 29, 2018 at 5:00 AM
by Elliot Siegel
person holding white smartphone sitting on stair

Many employees do not realize that if they are required to use personal devices, including cellphones and laptops, for work-related tasks, they are entitled to be paid or reimbursed for their use of personal devices for the benefit of their employer.  

Indeed, if your employer requires that you check email, communicate via text, send data or fill out forms on your phone or laptop you are entitled to reimbursement for those devices. 

Crucially, you are entitled to reimbursement regardless of whether you paid for the expense out-of-pocket. Even if the computer was a gift or your spouse pays for the family data plan, you are entitled to reimbursement.  

If your employer is not reimbursing you for your use of personal devices for work, we can help. Contact us today for a free consultation. 

May 29, 2018 at 5:00 AM
by Elliot Siegel
focus photography of person counting dollar banknotes

It's a common misconception among employees that you don't get overtime pay if you're paid a salary. Fortunately, this is not the case. 

To be exempt from overtime pay requirements under California law, an employee must be paid a salary of not less the twice the minimum wage and spend at least 51% of her time engaged in so-called "non-exempt" tasks.

This means that if you're paid a salary, but spend 51% of your time is spent doing "non-managerial" work, you have a right to paid for overtime. If you're paid a salary of less than $45,760, you have a right to be paid for overtime. If your employer requires you to accept paid time off in exchange for overtime work, you have a right to be paid for overtime.

If this sounds like your job, you may be entitled to overtime pay at 1.5x your hourly rate (and even 2x in some instances) whenever you've worked more than 8 hours a day, 40 hours a week, or seven consecutive days. Contact our experienced employment attorneys today for a free consultation about your case.