Category: Employment & Labor

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Employment & Labor Federal & State Laws

White Collar Overtime Exemptions in the Fashion Industry – Part II

Salary Thresholds Under New York State Law For White Collar Overtime Exemptions

In Part One of this article, we discussed tests for allowing exemption from overtime pay for “white collar” professional, executive and administrative employees under federal and New York State law.

Effective December 31, 2018, New York State’s salary basis threshold for exempt executive and administrative (but not professional) employees increased. Employers should periodically review the job duties, functions and salaries of those currently classified as exempt and, if they wish to maintain the exemption for those below the new thresholds, must increase their salaries accordingly. Here are the new minimum salary requirements to maintain exemptions from overtime for employers in New York State:

Employers in New York City

  • Large employers (11 or more employees)
    • $1,125.00 per week ($58,500 annually) on and after 12/31/18
  • Small employers (10 or fewer employees)
    • $1,012.50 per week ($52,650 annually) on and after 12/31/18
    • $1,125.00 per week ($58,500 annually) on and after 12/31/19

Employers in Nassau, Suffolk, and Westchester Counties

  • $900.00 per week ($46,800 annually) on and after 12/31/18
  • $975.00 per week ($50,700 annually) on and after 12/31/19
  • $1,050.00 per week ($54,600 annually) on and after 12/31/20
  • $1,125.00 per week ($58,500 annually) on and after 12/31/21

Employers Outside of New York City and Nassau, Suffolk, and Westchester Counties

  • $832.00 per week ($43,264 annually) on and after 12/31/18
  • $885.00 per week ($46,020 annually) on and after 12/31/19
  • $937.50 per week ($48,750 annually) on and after 12/31/20

New York State has no minimum salary for exempt “professional” employees, although most of those employees would still be subject to the federal salary minimum for exemption ($455 per week, or $23,660 annually). The U.S. Department of Labor (“DOL”) has not raised the federal minimum salary for exemption since 2004, but on March 7, 2019, the DOL published a proposed rule that would increase the salary threshold for managerial, administrative and professional white collar exemptions to $679 per week ($35,308 per year), to take effect on January 1, 2020.

New York Fashion Industry employers should review the job duties, functions and salaries of their employees whom they currently classify as exempt from overtime pay to insure compliance with both the job duties and salary requirements. For an employee whose salary falls below pay requirements, the employer will have to decide whether to increase the salary in order to be able to continue the overtime exemption or to reclassify the currently exempt employee as non-exempt and pay them overtime for hours worked over forty in a week.

For those currently exempt employees whom the employer decides to reclassify as non-exempt, the employer should insure that all their work time is accurately recorded as of the date of change and going forward. Finally, employers should make it a point to conduct regular reviews of the primary duties of those employees it wishes to continue as exempt, since merely paying the higher salaries will not be sufficient. To qualify for the overtime exemption, employers will be required to meet both the salary test and the job duties test.

SUMMARY

Federal and state overtime law are quite fact specific. Failure to comply can lead to expensive administrative and court proceedings. The statutes of limitations – that is, the look back periods the agencies and the courts may consider in calculating overtime pay deficiencies – are two years under federal law (three years if a willful violation is found), but are six years under New York State law. And both federal and state laws provide for liquidated (double) damages and for an employer to pay the legal fees of a successful plaintiff’s lawyer. Moreover, class and collective actions abound. In short, stay current on what you need to know and consult with employment counsel as needed and whenever in doubt; or be prepared to endure exceedingly painful, protracted and costly legal consequences.

Credit: Evan J. Spelfogel

See post…“White Collar Overtime Exemptions in the Fashion Industry – Part I“

Categories
Employment & Labor Federal & State Laws

White Collar Overtime Exemptions in the Fashion Industry – Part I

One of the most costly mistakes a fashion business can make is to misclassify an employee as overtime exempt regardless of the employee’s duties and functions. That creates the risk of substantial liability under both federal and state law.

The Federal Fair Labor Standards Act provides for several basic overtime exemptions. These include the executive, professional and administrative exemptions and are commonly referred to as “white collar” exemptions.

To be exempt from overtime pay, an employee must be paid a fixed salary regardless of hours worked of at least $455 per week ($23,660 per year) under federal law, and more than twice that amount under New York State Labor Law, and must have duties and functions that fall within the applicable duties test.

Executive Exemption Duties Requirements

To qualify as an exempt executive (high-level manager), an employee’s primary duties must relate to managing a business or a department within a business. The employee must regularly supervise at least two full-time employees or the equivalent in part-time employees, and must have the authority to hire, fire and discipline employees, or effectively to recommend such action. Secondary tests include interviewing and training employees, and assigning and directing their work. Typically, this exemption would attach to store and departmental managers.

Administrative Exemption Duties Requirements

To qualify as an exempt administrative employee, the employee’s primary duties must consist of the performance of office or non-manual work directly related to management policies or general business operations, including customarily and regularly exercising discretion and independent judgment involving the comparison and evaluation of alternative courses of conduct and making decisions, after consideration of the various possibilities, free from immediate direction or supervision.

Duties may relate to taxes, finance, accounting, budgeting, auditing, insurance, quality control, purchasing, procurement, advertising, marketing, research, safety and health, personnel management, human resources, employee benefits, labor relations, public relations, government relations, computer network, internet and database administration, and legal and regulatory compliance.

Factors may include whether the employee formulates, affects, interprets, or implements policies or practices, whether the employee may commit the employer in matters having significant financial impact, and whether the employee has authority to waive or deviate from established company policies and procedures without prior approval.

Professional Exemption Duties Requirements

An exempt professional employee is one who falls under the definition of either a “learned professional” or a “creative professional.” Learned professionals work in professions typically requiring an advanced degree (college or higher) and a prolonged course of specialized intellectual instruction such as law, medicine, accounting, engineering, teaching, or architecture. Primary duties must be intellectual and involve the regular use of discretion and independent judgment.

Creative professionals in the fashion industry include, among others, fashion designers, fashion stylists, textile designers, fashion public relations, fashion writers, fashion illustrators, garment technologists, graphic designers and artists, creative employees who are given only a subject matter or underlying concept of what they will create, and individuals who plan and direct the creative elements of new fashion and their advertising agencies. These individuals’ primary duty is performing work that requires invention, imagination, originality or talent, as distinguishable from work dependent merely on intelligence, diligence, and accuracy. Examples of non-exempt work in fashion include fabric cutters, sizers, copyists, re-touchers of photographs, and rewriters of press releases or advertising copy, and general fashion industry employees whose work is subject to substantial control.

In Part Two, we will review in detail the New York State salary thresholds for overtime exemption.

Credit: Evan J. Spelfogel

Evan is a senior counsel in the Employment & Labor Law Practice.

See post…“White Collar Overtime Exemptions in the Fashion Industry – Part II“

Categories
Business Law Employment & Labor General / Musings

Model Behavior

In September, 2017, LVMH and Kering jointly adopted “The Charter on the Working Relations with Fashion Models and Their Well-Being.” It was created following consultation with key external players, such as casting directors, stylists, models and modeling agencies. Intended to help improve working conditions for models, the charter seeks to apply standards of conduct to the signatory companies and to their external contractors, such as modeling agencies, worldwide. A monitoring committee will meet with brands regularly to assess compliance.Key provisions of the charter require compliance with the following:

  • Cast only female models for adult clothing who are at least French size 34 (US size 2) and only male models who are at least French size 44 (US size 34).
  • Require a valid medical certificate from each model, attesting to good health and ability to work.
  • Have a dedicated psychologist or therapist at the models’ disposal during work hours.
  • On the sometimes-difficult topic of nudity and semi-nudity, the charter is refreshingly frank: it will be allowed only with written consent of the model and parent/legal representative if under the age of eighteen. For all, there must be comfortable room temperatures and private changing zone, and the model may not be left alone with the photographer or other person connected with the production.
  • No hiring of models under the age of sixteen for photoshoots or shows in which the model would be called upon to represent an adult and, for those models aged sixteen to eighteen, a restriction of work hours to 6:00 a.m. to 10:00 p.m.
  • Provide food and drinks that comply with the models’ dietary needs. Alcohol is not permitted, with limited exceptions.
  • Establishment of a grievance system (such as a hotline). Brands have the right to make unannounced inspections.

As leading multi-brand companies based in the world’s fashion capital, LVMH and Kering are positioned to make a global industry-wide impact with the charter. By extending enforcement by their brands to external contractors (such as modeling agencies) the companies are using their collective power potentially to cause change throughout the fashion business. LVMH and Kering have invited other brands to sign the charter. Antoine Arnault, a member of the LVMH board of directors and the CEO of its Berluti men’s footwear brand, has expressed his belief that, “[other brands] will have to comply because models will not accept being treated certain ways by [some] brands and another way with others.”[1]

Within less than a year following the announcement of its adoption, the charter is bringing change throughout the fashion business by, in part, influencing others in the field to adopt similar measures to promote improved working conditions for models. ELLE and Version Fémina magazines signed onto the charter. Condé Nast and Tapestry Inc. – the parent company of Coach and Kate Spade – each released their own standards of conduct for models, and Elite Models is expected soon to follow.

Katie Grand, editor-in-chief of Love magazine, expressed to Women’s Wear Daily that learning about the LVMH/Kering Charter made her “mindful that models need to change in private.”[2]

In February of this year, LVMH and Kering Group further demonstrated their commitment to the charter by launching www.wecareformodels.com, a website that is intended to provide models with access to advice from expert nutritionists, psychologists, and other professionals in the fields of mental and physical health.

Previously, the Council of Fashion Designers of America had implemented health initiatives and guidelines to promote wellness and healthier working environments for models. The initiatives were not about policing brands but were intended to raise awareness and promote education. The LVMH/Kering charter differs in that the companies have implemented the policy and are self-monitoring. But it is more: the charter does not function merely as a set of corporate guidelines but as rules of conduct for all participants in corporate projects in which models are involved. The founders of the charter have stated clearly that, if any external partner should fail to comply with the charter, they will sever their relationship with it.

Although the charter is not legislation, it is important to recognize that its medical certification requirement is in line with the EU labor laws for fashion models that were implemented in October 2017, only a month after the adoption of the charter. The charter’s age-specific rules for models under age 16 are in accordance with New York child performer laws that require special considerations for underage models, including restricted working hours, mandatory breaks, and school attendance obligations.[3] In short, the charter is current on where the law has been headed internationally, and it is quite possible that showing compliance with the charter could have bearing on judicial thinking, particularly on questions of liability and in any potential damages awards, in future actions concerning treatment of models.

Will the charter create a new norm for the modeling industry? The fashion business has shown that, while styles change quickly, patterns of behavior generally change far more slowly; but for models, some change appears to be coming at last.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[1] Osman Ahmed, A New Charter Aims to End Model Abuse: Will it Work?, The Business of Fashion (Sept. 7, 2017), https://www.businessoffashion.com/articles/intelligence/lvmh-kering-model-charter-will-it-work.

[2] Rosemary Feitelberg & Lisa Lockwood, Next Steps: How to Cure Fashion’s Model Scandal, Women’s Wear Daily (Mar. 26, 2018), http://wwd.com/fashion-news/fashion-features/fashion-reaction-french-law-skinny-models-10302035/.

[3] Nora Crotty, New York Signs Law Protecting Child Models’ Labor Rights, Fashionista (June 27, 2018), https://fashionista.com/2013/10/new-york-signs-law-protecting-child-models-labor-rights.

Credit:  Gloria Kim | Guest Post

Gloria Kim begins her third year at the Fordham University School of Law in the fall of 2018. Gloria has worked at Ralph Lauren as a wholesale planner and at Louis Vuitton as a legal intern. She is an active participant in the school’s Fashion Law Institute and earned her Bachelor of Arts degree from the University of Virginia.

Categories
Employment & Labor Womenswear

An American in Paris

Greg Kessler
Rodarte S/S 2018 Paris Haute Couture Week July 2017

Looking back on Paris Fashion Week 2018, it is fun to reflect on the undeniable allure of Paris. Maybe it is the Parisian lights. Maybe it is because it is the City of Love. But there is something that attracts Francophiles from all over the world. A long-time fashion hub, Paris has been winning the hearts of more and more American fashion designers. Traditionally, New York Fashion Week is the reference mark for American design. Yet in just the past year, American designers Rodarte, Proenza Schouler, Thom Browne, and Joseph Altuzarra have opted to show their collections in Paris instead.

All of the Americans in Paris cited creativity as the major reason for relocating their spring and fall shows to Paris. Prior to Rodarte’s Paris Haute Couture Week debut last summer, co-founder Laura Mulleavy told The New York Times’s Elizabeth Paton: “I like being part of a new situation.” Co-founder Kate Mulleavy expanded:

“Ultimately a process should fuel creativity…France treats fashion as art; it just isn’t like that in America. Just spending time in [Paris], being part of it, is a reminder that enjoying new experiences fuels your best ideas and designs. Your imagination can totally come alive.”

Nevertheless, new opportunities also bring new legal issues. The initial question regarding work in France often is: Will I need visas or work permits for my American staff in order to show my collection in Paris? The good news: since 2016, if you are working in France for three months or less for the purpose of putting on a trade show, an art exhibition, or a fashion show, you need neither visas nor work permits.

Also, keeping in mind that French law emphasizes employee well-being, France requires its foreign employers to have documentation on file with the French counterpart to the United States Social Security Administration.

France and the United States have a reciprocal agreement whereby time spent working in France is considered eligible for social security and future benefits, like retirement, disability, and survivor’s insurance, in the United States. US employers must file a social security form for each employee working abroad. However, those benefits (as with so many others) do not apply to independent contractors. Therefore, those make-up artists, hairstylists, and public relations personnel employed by others but who are “hired out” by designers for shows must have their own full-time employers file social security forms for them.

Before starting work in France, an American employer transferring employees temporarily must file a declaration of workplace safety with the office for the International Posting of Workers in France, also known as Prestation de Services Internationales en France (SIPSI). Upon such filing, SIPSI will alert the French authorities responsible for inspecting the posting locations of foreign employees to examine the proposed fashion show site. Unlike the multiple social security forms required by an employer in the US, only one SIPSI filing is needed per employer, per location.

Much as in the critically acclaimed movie, as an American in Paris you will want to spend your free time eating baguettes, sightseeing, taking pictures, creating memories, and perhaps falling in love. It therefore would be wise to consult counsel and to address the business and legal issues in advance so that, once the fashion show has been completed, you will be able devote your time to drinking wine, eating cheese, and indulging in the many facets of French culture.

Greg Kessler
Rodarte S/S 2018 Paris Haute Couture Week July 2017

Credit: Candace R. Arrington

Photo Credit: Greg Kessler

Categories
Employment & Labor Textiles

Fast Fashion – Slow Justice?

When you hear the term fast fashion, what pops into your head? Trendy designs, hot off the runways of Europe, reinterpreted at prices for all? Affordable, mass-produced clothing? How about labor unrest?

It’s long been true that the garment industry, as with others in which production is outsourced to developing nations, has had its troubles with employment practices at source factories. Those practices continue, particularly in factories in Asia and Eastern Europe. Most production appears to be completed fairly. Recently, however, an unwelcome spotlight has fallen on Zara and its parent company, Inditex. Back in July 2016, the Bravo Tekstil factory in Turkey, which had manufactured clothes for Inditex under the Zara brand, as well for as other fast fashion houses such as Mango and Next, abruptly closed. The former Bravo workers went to court to obtain a ruling that they were entitled to three months’ unpaid wages and severance pay from their former employer. With the employer’s principal having disappeared with the funds that the factory had received for the production of the garments, the workers attempted to have Inditex and the other fashion houses take responsibility for the payment of their lost wages. Although apparently not legally liable, Inditex had announced in 2016 that– together with Mango and Next – it would establish a “hardship fund” to compensate the workers. The three companies have since offered to pay about one quarter of the claims, collectively offering the equivalent in Turkish lira of about US $700,000.

That did not satisfy the former workers, who have focused their efforts on Inditex and the Zara brand in their attempt to recover their money. A number of these workers recently went into Zara stores in Istanbul and inserted hidden tags into merchandise. The tags advised potential purchasers that the people who had made Zara clothes such as those had not been paid for their work. Although it is not clear if the pieces so chosen were made in the shuttered factory, the resulting publicity surely did Zara no favors. Indeed, if there is a party in the wrong, it is the former employer, but that party is out of the picture, and the result is contention over what was intended to be an act of corporate generosity.

Why do these situations exist? In large part, it is due to the fast-fashion business model, which requires production of vast quantities of inexpensive clothes very quickly (as the name implies). Rapid and cheap can be, and has been, accomplished successfully many times, but the exceptions can be horrific. The Rana Plaza building collapse in Bangladesh, which killed over 1,130 garment-factory workers and injured over 2,500 more several years ago, is the most famous case in point.

How can a company as much as half a world away, eager for quick production, trust that its sources pay fairly, honor agreements to workers, provide clean working conditions and—quite literally—assure that the roof will not come down?

Contracts with source factories typically contain clauses prohibiting child labor and forced labor, mandating safe and healthy working conditions—and demanding compliance with often very strictly delineated employment standards and practices. But from far away, that is difficult to enforce, and as anyone who has ever inspected a factory knows, when they are aware that you are coming, things start to look much better—at least as long as you are there.

Earlier this year, a coalition of labor and human rights groups produced a report on transparency in the global garment industry supply chain. The hope is that, by encouraging fashion companies to publish accurate information concerning the factories in which their garments are manufactured, they will undertake to assist further to prevent, address and correct any human rights abuses that may occur there. It remains to be seen as to how successful these new initiatives will be. All that can be certain for now is that the problem will not go away and that counsel for companies seeking sourcing in developing areas should be diligent in working with management to help minimize both business risks and any potential harm to factory workers.

Credit:  Laura E. Longobardi

Laura is counsel to Phillips Nizer’s Litigation Department and Labor & Employment Law and Real Estate Law Practices.

Categories
Employment & Labor General / Musings

Zone Defense

Stacks of money and judges gavel on wooden table

Tips To Help Avoid Adverse Claims and Protect Your Company
In the Event of a Lawsuit

It is axiomatic that a successful business in the fashion industry requires close attention to detail and countless hours of work. While the threat of potential litigation should not be at the forefront of management’s thoughts, here are some tips to bear in mind to reduce your potential future exposure and to place your company in a better position to defend itself in the event it is faced with a lawsuit or a potential lawsuit:

  • Notify your Insurance Carrier. If you are served with a Summons and Complaint, or are threatened with a lawsuit, notify your insurance carrier. If you fail to timely notify your insurance carrier it may deny coverage, and the company could be stuck with otherwise avoidable out-of-pocket defense and indemnification costs.
  • Implement and Enforce an Anti-Harassment Policy. An affirmative defense may exist to protect the company from vicarious liability for certain sexual harassment/discrimination claims based upon actions by supervisors and co-employees if the company implements and enforces an anti-harassment/discrimination policy; exercises reasonable care to prevent and correct promptly any sexually harassing discriminatory behavior; and the employee unreasonably fails to take advantage of any preventative or corrective opportunities provided by the employer or to avoid harm otherwise.
  • Two Company Representatives Should Participate in Disciplinary, Evaluation and Exit Interview Meetings With Employees. Many employment claims (or issues that may give rise to employment claims) can stem from a disciplinary meeting, employee evaluation or exit interview, when a company representative (whether the H.R. director or an immediate supervisor) informs an employee of job concerns, performance issues or that employment is being terminated. It is advisable for the company to have two company representatives at those meetings to be better able to confirm or deny what transpired (to avoid a “he said she said” scenario) in the event of a subsequent claim by the employee.
  • Careful! Emails Are Not Private. Once a lawsuit is underway, the company will likely be required to turn over emails (or entire accounts) that may be relevant to the subject-matter of the lawsuit. So, the next time you send a personal email from your work account, be mindful of its content, especially if you don’t want some lawyer, like myself, reading about your personal life. Conversely, lawyers either prosecuting or defending a case are always looking for the “smoking gun.” So, before you click “Send”, make sure you are comfortable that, if a lawsuit arises, your email will not be the “smoking gun” that an opposing lawyer may be seeking.
  • Keep Accurate Time Records of Non-Exempt Employees. It is not only statutorily required for employers to do so, but is critical to the defense of a Fair Labor Standards Act claim for unpaid (or underpaid) wages, to accurately keep and maintain time records of all non-exempt employees. If the company maintains accurate and orderly time records on a daily basis, you will not be in the position of having to scramble (or spend countless hours) compiling these crucial documents for your defense or trying to defend against an employee’s claim without potentially crucial documentary evidence.
  • Avoid Spoliation Claims Arising From Destruction of Surveillance Videos. Sometimes a claim for spoliation will be made if relevant evidence has been intentionally or negligently destroyed. This can arise not only from the destruction of documents, but also when video surveillance captures relevant footage which is not retained. A possible defense here would be to ensure the company has thoroughly documented and enforced a recycling and retention procedure relating to the company’s surveillance.

The list above is generally focused in my practice areas of litigation. It is not intended to be, and in fact is far from, a comprehensive list. Each point merits its own blog post, which will likely follow in the near future.

Credit:  Litigation Practice