Too Little Too Late If You Work for The State? The Applicability of Employee Thresholds to Age Discrimination Claims from State Workers

The Issue

Americans born in 1978 will be turning 40 this year. In addition to the wisdom that comes with age, these citizens will also be gaining the possibility of protection from age discrimination under the Age Discrimination and Employment Act (ADEA). This act prohibits employers from discriminating “against persons 40 years of age or older.29 U.S.C. §§ 621–34. According to 29 U.S.C. § 630(b), the term “employer” is defined as:

[…] a person engaged in an industry affecting commerce who has twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year․ The term also means (1) any agent of such a person, and (2) a State or political subdivision of a State and any agency or instrumentality of a State or a political subdivision of a State, and any interstate agency, but such term does not include the United States, or a corporation wholly owned by the Government of the United States. (Emphasis Added)

If the “twenty or more employees” threshold is not met, workers over 40 are ineligible for ADEA protection. The circuit courts are split on whether the 20-employee threshold only applies to persons, or whether agents of persons, and state entities are included.

The Split

The Seventh Circuit

In Kelly v. Wauconda Park Dist. (7th Cir. 1986), the Seventh Circuit ruled that government entities were encompassed by the 20-employee threshold in 29 U.S.C. § 630(b). The court utilized a two-step process in determining whether government entities had to meet the 20-employee threshold. First, the court looked at whether 29 U.S.C. § 630(b) is ambiguous. If the statute was determined to be ambiguous, then the court would analyze legislative history to guide its decision.

In the first step of the analysis, both parties made arguments about the ambiguity of the statute. Kelly made an argument that the statute excluded government entities, and Wauconda argued that government entities were included by the statute. The court concluded that the statute was ambiguous because it had two reasonable but differing interpretations.

The court then analyzed the legislative history. The lower court ruled “that ‘[t]he legislative history of the 1974 amendment, the similarities between it and a parallel amendment of Title VII, and common sense’ all favor [Wauconda’s] reading of section 630(b).” The Seventh Circuit believed that the analysis of the 1974 ADEA amendment’s history was a valid point, and that Title VII had a large number of parallels to the ADEA. Ultimately, the Seventh Circuit held that the legislative history weighed in favor of the ADEA’s 20-employee threshold applying to government entities.

Therefore, Wauconda Park District, a local government entity, was not an “employer” for ADEA purposes because it did not have the required number of employees as specified in 29 U.S.C. § 630(b).

The Sixth, Eighth, and Tenth Circuits

In EEOC v. Monclova Township (6th Cir. 1990), Palmer v. Arkansas Council On Economic Education (8th Cir. 1998), and Cink v. Grant County (10th Cir. 2015), the Sixth Circuit, Eighth Circuit, and Tenth Circuit, respectively, came to the same conclusion as the Seventh Circuit in Kelly.  Each circuit held that the 20-employee threshold applied to state entities.

The Ninth Circuit

In Guido v. Mount Lemmon Fire Dist. (9th Cir. 2017), the court held that the ADEA definition of “employer” “is deconstructed as follows: The term “employer” means [A—person] and also means (1) [B—agent of person] and (2) [C—State-affiliated entities].” Due to the division of these three categories, the “person” category is the only category of the three that is modified by the “who has twenty or more employees” clause. If this is the case, then “agents of the person” or “state-affiliated entities” would have to comply with the ADEA regardless of meeting the 20-employee threshold.

The court supports their position by claiming that the “person” category is further defined by 29 U.S.C. § 630(a) (The term “person” means one or more individuals, partnerships, associations, labor organizations, corporations, business trusts, legal representatives, or any organized groups of persons), and is narrowed by the “engaged in an industry affecting commerce who has twenty or more employees for each working day” clause. The court also claims that the “state-affiliated entities” category is further defined by “the various types of State-affiliated entities covered, such as a ‘political subdivision of a State’.”

The Equal Employment Opportunity Commission (EEOC) supports the Ninth Circuit’s holding. The EEOC states that when Title VII was amended, Congress was able “to apply clarifying language across multiple definitions of a term.” The clarifying language in question applied to “States and State-related entities, including political subdivisions of a State.” 42 U.S.C. § 2000e. The EEOC believed that Congress could have applied similar language to 29 U.S.C. § 630(b) if it had wanted to, but that Congress chose not to.

The ninth circuit ultimately held that “a political subdivision of a State need not have twenty or more employees in order to qualify as an employer subject to the requirements of the ADEA.”

Looking Forward

Based on the holdings from the various circuits, a state entity may or may not be considered an “employer” under the ADEA’s 20-employee threshold. On February 26, 2018, the Supreme Court granted certiorari to hear the case of Guido v. Mount Lemmon Fire Dist. Thus, the issue may be resolved soon.

For further reading, see what Squire Patton Boggs has to say on the topic.

Here’s a Tip: Deciding if Dual Jobs Qualify for “Tip Credit”

The Issue

Working as a server requires an individual to handle a vast array of responsibilities, often for minimal compensation. Balancing a tray full of food, anticipating when drinks need to be refilled, serving as a liaison between the kitchen and customers, and performing all other duties as assigned can really wear on a person, especially when customers don’t realize that their tips make up a large percentage of a server’s income. Recently, the compensation for these “other duties” have been causing cases to come out of the frying pan and into the fire.

Under 29 USC §203(m), employers with “tipped employees” (employees who make $30 per month or more in tips) are allowed to count tips as a part of an employee’s salary, and thus can pay these employees a lower base salary. Tips are counted as “tip credit” towards the employee’s monthly salary. Cumbie v. Woody Woo, Inc. (9th Cir. 2010). As long as the base salary is adjusted so that, when combined with monthly tips, it evens out to the requisite minimum wage, and employer has met his or her legal duty.

The issue is that some employees serve “dual jobs” (performing the tasks of both a tipped and non-tipped employee). Under 29 C.F.R. § 531.56(e), there is a provision noting that time spent on “related duties” can be counted towards the tip credit. The Department of Labor, in FOH § 30d00(f) (2016), has stated that if an employee spends more than 20% of their time serving in the non-tipped position, then the work done in said position cannot be factored into tip credit and the employee must be paid the legal minimum wage. In Marsh v. Alexander LLC, (9th Cir., 2017), the Plaintiff alleged that he performed duties unrelated to generating tips during more than 20% of his work hours, but his employer claimed a tip credit for the work.

The Split

The Eighth Circuit

The Eighth Circuit addressed this issue in Fast v. Applebee’s Int’l, Inc., (2011), where they stated that the Department of Labor’s interpretation of FOH § 30d00(f) was ambiguous, but that the 20% margin was ultimately a reasonable interpretation, holding “[t]he 20 percent threshold used by the DOL in its Handbook is not inconsistent with § 531.56(e) and is a reasonable interpretation of the terms ‘part of [the] time’ and ‘occasionally’ used in that regulation.”

The Ninth Circuit

The Ninth Circuit, in Marsh v. Alexander LLC, (2017), states that the Eighth Circuit failed:

“…to grapple with the crucial question whether the FOH’s time sheet approach is a reasonable interpretation of ‘job’ (in the regulation) or ‘occupation’ (in the statute),”

and

“…that in order for an employee to be engaged in two different occupations there must be a clear dividing line between two different types of duties, such as when one set of duties is performed in a distinct part of the workday.”

In Marsh, the Ninth Circuit held:

“…no provision with the force of law permits the DOL to require employers to engage in time tracking and accounting for minutes spent in diverse tasks before claiming a tip credit.”

Looking Forward

The appropriate calculation for minimum wage has been hotly debated. The outcome of this circuit split will better define how tipped workers are to be compensated for their work. The courts will have to analyze whether the 20% rule is a justifiable standard for compensating tipped workers for non-tipped tasks.