Trump Administration Proposes Rollback of Obama-era Tip-Pooling Regulations

tip-jar-1422341The Department of Labor (DOL) has proposed changes to the Fair Labor Standards Act’s (FLSA) tip pooling regulations. The proposed changes would roll back the Obama administration’s 2011 regulations that prohibited employers from distributing tips to anyone other than front-of-the-house staff who earned them. Following the 2011 Obama administration regulations, the DOL has maintained that tips earned by front-of-the-house employees–including servers, bartenders, and bussers–are the property of the employees, and that employers may not mandate that they be shared with back-of-the-house employees such as cooks and dishwashers. The current rules also allow for a “tip credit,” whereby employers can pay tipped employees less than the federal minimum wage, as long as tips make up the difference.

The proposed new regulations provide that employers who pay their employees the federal minimum wage and do not take advantage of the “tip credit” own the tips made by front-of-the-house employees. Consequently, employers can pool tips and distribute them between front-of-the-house and back-of-the-house employees as the employer chooses. However, the new regulation lacks concrete limitations, leaving room for employers to use those pooled tips for any purpose. Under the proposed regulations, employers could pocket the tips for themselves.

Proponents of the new regulations say they will remedy the vast disparity in wages between front-of-the-house and back-of-the-house employees. Opponents argue it is not fair for employers to have full control over the distribution of tips earned by employees. They argue, moreover, the new regulations will not actually solve the discrepancy in pay between front-of-the-house and back-of-the-house employees but rather will lead to business owners pocketing the tips.

Lawmakers are now evaluating comments on the new proposed regulations, a process that has no set timeline and could result in the withdrawal, modification, or finalization of the rule change. The DOL Office of Inspector General has also announced that it is auditing the rule-making process related to the new regulations. This announcement came in response to a recent Bloomberg Law report that exposed a previously unreleased internal economic impact analysis showing that workers would lose billions of dollars in tip income as a result of the new regulations.

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Employers: Give Your Employee Handbook A New Year’s Check-Up

paperworkThe National Labor Relations Board (NLRB) is scrutinizing employee handbooks that violate the National Labor Relations Act (NLRA), the law that protects an employees’ collective bargaining and organizing rights. The NLRB looks for workplace rules that restrict—or could be construed to restrict—employees’ right to engage with each other, to organize (including forming, joining or assisting labor unions) and to take other collective action. The language employers use in their employee handbooks is key, because provisions meant to protect the employer may violate the NLRA. The NLRB recommends employers use detailed wording, sufficient context and clarifying examples to prevent misinterpretation.

According to NLRB guidance, your organization’s handbook must not:

  • Prevent employees from discussing hours, wages or other terms of employment, or give employees the impression that they cannot discuss hours, wages, or other terms of employment with each other and with non-employees. However, your handbook may contain a confidentiality provision that specifically applies to the privacy of business details.
  • Prevent employees from criticizing your organization or its supervisors or lead employees to believe that criticizing your organization or its supervisors is restricted. Rules that broadly prohibit “disrespectful,” “rude,” or “inappropriate” behavior without context are often found to be unlawful.
  • Prevent employees from engaging in discussion among themselves. Rules that broadly prohibit “derogatory,” “insulting,” or “offensive” comments without context are often found to be unlawful.
  • Prohibit employees from speaking on an individual level with the media or other third parties, including about terms and conditions of their employment. However, your handbook may prohibit employees from speaking to the media or other third parties on behalf of the employer without authorization.
  • Prevent employees from using your organization’s name, logo, or trademark in a non-commercial manner. However, your handbook may require employees to respect copyright and intellectual property laws.
  • Contain a total ban on photography, recordings or the use of a camera on company property. However, your handbook may regulate photography and recording in the appropriate interest of privacy or while employees are on their “work time.”
  • Contain any provision that your employees would reasonably interpret as preventing them from going on strike, engaging in walkouts or “walking off the job.” However, your handbook may prohibit employees from leaving the workplace without permission for reasons unrelated to organizing or unionizing activities.
  • Contain a broad rule prohibiting any employee conduct that is not in the best interest of the company. However, your handbook may contain specific policies preventing self-dealing or competition against the company.
  • Provide male employees with less parental leave than female employees upon the birth of a child. Furthermore, your handbook must include information about pregnancy accommodations.

Other employment guidelines to consider when crafting your handbook include, limiting unemployment and post-employment claims by:

  • Mandating employees sign a written document detailing your organization’s attendance and punctuality expectations, provided they comply with federal, state and local leave laws.
  • Providing written notice to any employee in violation of these expectations before termination.
  • Keeping all relevant records, including a copy of your attendance policy and all supporting documentation in the case of an employee’s termination.

Ensure compliance with updated sick leave laws (in Chicago and some other Cook County municipalities) by:

  • Allowing your employees to accrue up to 40 hours of paid sick leave per year and carry any unused time over into the next year.
  • Allowing your employees to use at least half of their annual accrued paid sick leave to care for their children or other family members.

If you have any questions about whether your employee handbook complies with the law or you would like a handbook drafted in accordance with the NLRA and other applicable laws, please contact Marcus & Boxerman at (312) 216-2720 or

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NLRB Reinstates Prior Joint-Employer Standard

On December 14, 2017, in a 3-2 decision, that could allay fears of franchisors being joint employers of their franchisees, the National Labor Relations Board overruled the Board’s 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015) (“Browning-Ferris”), and returned to the pre–Browning Ferris standard that governed joint-employer liability.
According to the NLRB, in all future and pending cases, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) only if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine.  In other words, explained the NLRB, under the restored pre-Browning Ferris standard, proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will not be sufficient to establish a joint-employer relationship.  The Board majority concluded that the reinstated standard adheres to the common law and is supported by the NLRA’s policy of promoting stability and predictability in bargaining relationships.
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Chicago’s Sweetened Beverage Tax Repealed Effective December 1, 2017

enjoy-a-coke-1574937In a nearly unanimous vote by the Cook County Board on October 11th, the Cook County sweetened beverage tax has been repealed. Passed in early August 2017, the controversial tax was only in effect for two months before lawmakers decided to retire it. Proponents of the tax reasoned the tax is an effective way to fight obesity and other related health conditions, while also generating income for the county. Opponents of the tax argued that it damaged small businesses and led to plummeting store sales, as customers simply went across county lines to purchase beverages subject to the tax. Large corporations including PepsiCo and Coca-Cola spent millions of dollars fighting the tax. Lawmakers now have until the end of November to adjust the Cook County budget to account for the $200 million of revenue the County estimates the tax would have brought in. The repeal goes into effect December 1, 2017.

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Employers: Keep Your Hands Off Of Employee Fingerprints

fingerprintA once little-known law, the Illinois Biometric Information Privacy Act (“BIPA”), is now the subject of class actions by employees alleging that employers have misused their biometric information.  This client update should help employers avoid unknowing violations of the BIPA and the significant risk of an employee class action lawsuit.

The BIPA sets restrictions on employers’ use of biometric information, such as scans of the iris or retina, fingerprints, handprints, and face or voice recognition. Because this information is sensitive and unique to the employee, the BIPA requires employers to store, transmit, and protect it securely.

The BIPA specifies that any employer in possession of biometric information must develop a written policy made available to the public. Your policy must establish:

  • A retention schedule for storing biometric information.
  • Guidelines for permanently destroying biometric information when the initial purpose for collecting it has been satisfied, or within 3 years of the employee’s last interaction with the company.

When collecting or otherwise receiving an employee’s biometric information, you must:

  • Inform the employee in writing that the information is being collected, the purpose for collection, and the length of storage.
  • Obtain a written release from the employee.
  • Store and transmit all biometric information with the same or better security than used for confidential company information.
  • Not sell, lease, trade, or otherwise profit from biometric information, or disclose it unless the employee consents or disclosure is required by law.

Penalties for violating the BIPA are harsh. If you are found to have negligently violated a provision, employees may recover a minimum of $1,000 for each violation, plus attorneys’ fees. If you are found to have intentionally or recklessly violated a provision, employees may recover a minimum of $5,000 for each violation, plus attorneys’ fees.

Importantly, although this client update focuses specifically on employee biometric information collected by employers, BIPA protections apply to anyone whose biometric information you collect, including your customers.

If you have any questions about whether your biometric information policy complies with the law or you would like a policy and employee release drafted in accordance with the Biometric Information Privacy Act and other applicable laws, please contact Marcus & Boxerman at (312) 216-2720 or

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Cook County “Earned Sick Leave” Ordinance Effective July 2017

termometer-1418018The Cook County Board of Commissioners recently passed the Earned Sick Leave Ordinance, requiring employers to provide paid sick leave to eligible employees.  The Ordinance goes into effect July 1, 2017.

To be eligible for paid sick leave, an employee must work at least two hours in a two-week period, and at least 80 hours in a 120-day period, for a covered employer, while physically present in Cook County.  Covered employers must have a place of business in Cook County and must employ at least one covered employee.  The Ordinance will not apply to collective bargaining agreements, to construction workers, or to employers with paid-time-off policies that already satisfy each of the Ordinance’s requirements.

Paid sick leave is available when an employee or one of his or her family members is ill, injured, receiving medical care or the victim of domestic violence.  Under the Ordinance, employees earn 1 hour of paid sick leave for every 40 hours worked.  An employee can use a maximum of 40 sick leave hours per year and roll over up to 20 unused hours to the next 12-month period.

Eligible employees begin earning paid sick leave on July 1, 2017, or the first calendar day after starting employment, whichever is later.  New employees may begin using their accrued leave after 180 days of employment.  There is no payout for unused sick leave.

Employers can adopt a written notification policy for taking leave that is not unreasonably burdensome, such as allowing notification of leave by phone, email or text message.  If an employee takes leave for more than 3 consecutive days, the employer may ask for certification, such as a doctor’s note, to ensure that the leave was for a qualifying purpose.

Employers must provide employees with notice of the Ordinance by conspicuously posting a notice in each facility where covered employees work and by providing each covered employee with written notice of his or her paid sick leave rights.  The Cook County Commission on Human Rights is preparing a form notice for distribution.

For more information about the Cook County Earned Sick Leave Ordinance, please contact Marcus & Boxerman at 312.216.2720 or

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New Illinois Law Renders Non-Compete Agreements for Low-Wage Employees “Illegal and Void”

non-compete-selected-optionOn August 19, 2016, Governor Bruce Rauner signed into law the Illinois Freedom to Work Act (the “Act”).  The Act prohibits certain Illinois employers from entering into non-compete agreements with low-wage employees.  The law takes effect January 1, 2017.

The Act will render “illegal and void” any covenant not to compete entered into after January 1, 2017, between a private sector employer and a low-wage employee.  An employer under the Act is any entity, individual or group of individuals “acting directly or indirectly in the interest of an employer in relation to an employee, for which one or more persons are gainfully employed on some day within the calendar year.”  Despite the broad definition of “employer,” the Act will not apply to governmental entities.

The Act defines a “low-wage employee” as any employee paid the greater of, $13 per hour or the applicable federal, state or local minimum wage.  Therefore, in Illinois, the law applies to all employees earning $13 per hour or less.

The Act prohibits covenants not to compete, which are defined as an agreement that restricts a low-wage employee from performing any work (1) for another employer in a specified period of time, (2) in a specified geographical area, or (3) for another employer that is similar to the employee’s work for the employer with whom the employee has the agreement.

Importantly, the Act will not void non-compete agreements entered into prior to January 1, 2017.  The Act also will not affect agreements for the protection of an employer’s confidential information or trade secrets or non-solicitation agreements protecting an employer’s employees or customers.

There has been a recent general trend of challenging non-compete agreements for lower paid workers, and this law follows a lawsuit by the Illinois Attorney General over the use of non-compete agreements by quick service food chains, such as Jimmy John’s, attempting to prevent low-wage employees from working for competitors.

If you have any questions about whether your non-compete agreements or competition policies will be affected by the Act, contact Marcus & Boxerman at (312) 216-2720 or

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Restaurant Owners: Are You Taking Advantage of All Tax Credits and Deductions?

tax-credits-selectedRestaurant owners can take advantage of many special deductions and credits providing substantial tax savings. Here are several to explore:

Tax Credits for Hiring in Empowerment Zones.  Tax credits are available for hiring employees who live and work in an Empowerment Zone, an area in need of economic revitalization as determined by the US Department of Housing and Urban Development. Eligible employees must be employed for 90 days before an employer may credit up to 20% of the first $15,000 paid to the employee (i.e. $3,000) per year.  There is no limit to the number of eligible employees for whom an employer can claim credit. This temporary program that has been extended until December 31, 2016, but credits are renewable each year pending IRS approval.

Full Purchase-Price Deduction on Qualifying Equipment.  Section 179 of the Tax Code permits businesses to deduct from gross income the full purchase price of new and used qualifying equipment and off-the-shelf software. The deduction limit for 2016 is $500,000.

Depreciation.  In recognition of the extensive usage restaurant equipment sees compared to most equipment, qualifying leasehold improvements and qualifying restaurant equipment are eligible for shorter 15-year depreciation periods instead of the standard 39-year scale. For 2015 to 2017, moreover, a bonus depreciation permits a business owner to take an additional 50% deduction on the cost of qualifying new property for the year it entered into service. This bonus amount decreases to 40% for years 2018-2019.

Tenant Improvement Allowances.  Section 110 of the Tax Code permits certain tenants of retail space to exclude from income landlord allowances used to construct or improve leased real property for the tenant’s benefit. This exclusion applies only to short-term leases (15 years or less) for non-residential real property. A lease or separate agreement executed as a provision of the lease must specifically state that the allowance must be applied toward construction on, or improvement to, qualified long-term real property used in the tenant’s trade or business.

Restaurant Remodel/Refresh Safe Harbor.  This safe harbor permits most restaurants and retailers to deduct 75% of qualifying remodel or refresh costs, requiring them to capitalize only 25% of the remodel or refresh. These costs must be incurred in connection with qualifying activities in a qualified building primarily used for retail and food and beverage sales. The safe harbor eliminates the computation and analysis of which costs should be expensed, capitalized and/or depreciated.

Credit for Portion of Employer Social Security Paid with Respect to Employee Cash Tips (FICA Tip Credit).  Restaurant owners may recover a portion of Social Security and Medicare taxes paid on income from employee tips. To receive the credit, employees must accumulate tips from customers by providing, delivering or servicing food or beverages and the employer must have paid or incurred employer Social Security and Medicare taxes on these tips. There is no credit for tips that help employees meet the federal minimum wage.

Employer-Provided Food.  Restaurant owners may deduct the value of meals furnished by the employer to an employee and his or her spouse and dependents for the convenience of the employer. To qualify for this deduction, the IRS requires the meals be necessary for the employee to perform his or her duties. Generally, “convenience of the employer” means the employee must remain on the premises in case of emergency or if allocated breaks are too short for the employee to reasonably get food elsewhere.

If you have any further questions about what deductions and tax credits your restaurant business may be eligible for, contact your CPA or Marcus & Boxerman at (312) 216-2720 or

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Seventh Circuit: Class and Collective Action Waivers in Employment Arbitration Agreements Unenforceable

lewis-selectedThe Seventh Circuit Court of Appeals recently ruled that provisions in employment agreements requiring individual arbitration of wage and hour disputes are unlawful under the National Labor Relations Act (“NLRA”). The court found that such provisions violate employees’ right to engage in “concerted activities for the purpose of collective bargaining.”

In Lewis v. Epic Systems Corp., an employer required its employees to pursue wage and hour claims through individual arbitration and also waive their rights to any collective or class action proceedings. An employee later filed a class action in federal court, alleging that the employer violated the Fair Labor Standards Act (“FLSA”) and Wisconsin law by misclassifying the class members as “exempt” employees and thus depriving them of overtime pay. The trial court denied the employer’s request to compel individual arbitration. On appeal, the Seventh Circuit affirmed the trial court decision, finding the arbitration clause unenforceable because it violated the NLRA by interfering with the employees’ right to collaborate for mutual protection.

The National Labor Relations Board (“NLRB”) maintains that the NLRA prevents agreements that restrict employees from working in concert to resolve disputes and improve the terms and conditions of their employment through mutual aid and protection. Until Epic Systems, courts had not followed the NLRB’s position, instead relying on the Federal Arbitration Act (“FAA”), which permits such arbitration agreements as valid, irrevocable, and enforceable, save upon such grounds as exist at law. In issuing its ruling, the Seventh Circuit in Epic Systems found no conflict between the FAA and NLRA, finding that because the restrictions on collective or class actions are unenforceable under the NLRA, they are unenforceable under the FAA.

The Epic Systems ruling runs contrary to the other federal courts of appeals, making it quite possible that the Supreme Court will step in to resolve the conflict. Until then, class or collective action waivers in pre-dispute arbitration agreements in the Seventh Circuit (Illinois, Wisconsin, and Indiana) are unenforceable and employers should be aware that they cannot rely on such waivers.

Employers should keep in mind that arbitration agreements for employees without class or collective action waivers are still enforceable. While the holding is limited to waivers that require consent as a mandatory term of employment, the NLRB suggests that all class or collective action waivers are unlawful, even when an opt-out is provided.

If you have immediate concerns about how the decision affects your employees, contact Marcus & Boxerman at (312) 216-2720 or

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Illinois and Chicago Employment Law Update: Minimum Wage, Paid Sick Leave and Employee Retirement Accounts

punch-clockThree important employment law changes in the City of Chicago and the State of Illinois may affect your business.

Chicago Minimum Wage Ordinance

On July 1, 2016, the City of Chicago’s minimum wage increased by 50 cents per hour, to $10.50 for non-tipped employees and $5.95 for tipped employees as part of the Chicago minimum wage ordinance approved in late 2014.  The Chicago minimum wage will increase to $13 by 2019.

Employers that either maintain a business facility in the City of Chicago or are subject to at least one Chicago license requirement are bound by the ordinance and must pay all covered employees over the age of 18 the higher minimum wage after the first 90 days of employment.

Employers must post notice of the increase to all employees and must also provide notice of the increase with each employee’s first paycheck received after the effective date of the increase.  The notice can be found here.

Chicago Paid Sick Leave Ordinance

In June, the Chicago City Council passed an ordinance requiring employers to provide paid sick leave.  The ordinance goes into effect July 1, 2017.

Under the ordinance, employees earn 1 hour of sick leave for every 40 hours worked, for a maximum of 40 hours per year.  A total of 20 unused sick hours can roll over into the following year, but there is no payout for unused sick days.  Accrual periods begin after an employee works 80 hours within a 120-day period.  Employees can start using their paid sick leave hours after a 180-day probationary period. Sick leave is available, for example, when an employee or one of his or her family members is ill, injured or receiving medical care, or if the employee is the victim of domestic abuse or sexual violence.

Individuals and business entities with at least one covered employee that maintain a business facility within the City of Chicago or are subject to at least one Chicago license requirement are bound by the sick leave ordinance.  Employers with paid time-off policies that already meet the ordinance’s requirements are exempt from this new ordinance.

Illinois Secure Choice Savings Program

Beginning July 1, 2017, Illinois will implement the Illinois Secure Choice Savings Program.
Under Secure Choice, employees may contribute to a Roth individual retirement plan through paycheck deductions.  Employees are automatically enrolled in Secure Choice but may choose to opt out.  Employers are required to facilitate contributions through the payroll process but are not required to make contributions to accounts or make any investment decisions.

Businesses with at least 25 employees and in operation for at least two years that do not currently offer a retirement plan must participate in the program.  Businesses in operation for less than two years or with fewer than 25 employees may choose to voluntarily participate.  Businesses with existing retirement plans cannot participate.  Employers have nine months from program inception to ensure their employees are enrolled or opted out.

If you have any questions about these changes, please contact Marcus & Boxerman at 312.216.2720 or

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