Feb 27, 2019 | Overtime & Wages
Restaurant and Fast Food Employees: Application of the Fair Labor Standards Act (“FLSA”) to Restaurant and Fast Food Employees
The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. After 40 hours of work in a workweek, pay at a rate not less than one and one-half times the regular rate of pay is required.
Restaurant and Fast Food Establishment Characteristics
The restaurant/fast food industry includes establishments that are primarily engaged in selling and serving to purchasers prepared food and beverages for consumption on or off the premises.
Restaurants/fast food businesses with annual gross sales from one or more establishments that total at least $500,000 are subject to the FLSA. Also, any person who works on or otherwise handles goods that are moving in interstate commerce is individually subject to the minimum wage and overtime protection of the FLSA. For example, a waitress or cashier who handles a credit card transaction would likely be subject to the FLSA.
Restaurant and Fast Food Establishment Wage and Labor Requirements
Minimum wage: Covered non-exempt workers are entitled to a federal minimum wage of not less than $7.25 per hour effective July 24, 2009. Wages are due on the regular payday for the pay period covered. Deductions made from wages for items such as cash shortages, required uniforms, or customer walk-outs are illegal if the deduction reduces the employee’s wages below the minimum wage or cuts into overtime pay. Deductions made for items other than board, lodging, or other recognized facilities normally cannot be made in an overtime workweek. Tips may be considered as part of wages, but the employer must pay not less than $2.13 an hour in direct wages and make sure that the amount of tips received is enough to meet the remainder of the minimum wage.
Food Credit: The employer may take credit for food which is provided at cost. This typically is an hourly deduction from an employee’s pay. However, the employer cannot take credit for discounts given employees on food (menu) prices.
TIPS: Tipped employees are those who customarily and regularly receive more than $30 a month in tips. Employees must be informed of the provisions of FLSA section 3(m) in advance if the employer elects to use the tip credit. Also, employees must retain all of their tips, except to the extent that they participate in a valid tip pooling or sharing arrangement.
Overtime: Overtime must be paid at a rate of at least one and one-half times the employee’s regular rate of pay for each hour worked in excess of 40 hours per week. In determining the regular rate for a tipped employee, all components of the employee’s wages must be considered (i.e., cash, board, lodging, facilities, and tip credit).
Some Typical Restaurant and Fast Food Establishment Wage and Labor Problems
If uniforms are required by the employer the cost of the uniform is considered to be a business expense of the employer. If the employer requires the employee to bear the cost, such cost may not reduce the employee’s wages below the minimum wage or cut into overtime compensation. When an employer claims an FLSA 3(m) tip credit, the tipped employee is considered to have been paid only the minimum wage for all non-overtime hours worked in a tipped occupation and the employer may not take deductions for walkouts, cash register shortages, breakage, cost of uniforms, etc., because any such deduction would reduce the tipped employee’s wages below the minimum wage.
Exemptions from Overtime: Section 13(a)(1) of the FLSA provides an exemption from FLSA monetary requirements for an employee employed in a bona fide executive, administrative or professional capacity or as an outside salesperson. An employee will qualify for exemption if all pertinent tests relating to duties, responsibilities and salary, as set forth in Regulations, 29 CFR Part 541, are met. The salary and duties tests for the exemptions are fully described in Regulations Part 541.
Source: U.S. Department of Labor. According to the Department of Labor, the aforementioned is for general information and is not to be considered in the same light as official statements of position contained in regulations.
Nov 30, 2018 | Shareholder & Investor Protection
SEC Warns That Scammers May Try to Take Advantage of California Wildfires
On November 29, 2018, the SEC’s Office of Investor Education and Advocacy issued an investor alert warning investors, including individuals who may receive lump sum payouts from insurance companies and others as a result of damage from the California wildfires, about fraudulent investment scams.
The SEC advised that fraudsters often try to use natural disasters, like the recent California wildfires, as a way to lure victims into investment scams. These scams include:
- So-called “investments” in companies purportedly involved in cleanup, repair and recovery efforts;
- False claims of affiliation with state and federal governments or large, well-known companies; and
- Sales of stock in small publicly-traded companies as part of “pump-and-dump” scams (promising high returns for investments in companies that supposedly will reap huge profits from recovery and cleanup efforts).
Some scams, according to the SEC, are circulated through unsolicited e-mail or social media, as well as by telephone. Fraudsters also may target individuals receiving money from insurance companies or other sources. The SEC warns that individuals, including those receiving lump sum insurance payouts, should be extremely wary of potential investment scams.
Investors: Use Caution, Ask Questions
The SEC advises investors that one of the best ways to avoid investment fraud is to ask questions. Investors should be suspect, if approached by somebody touting an investment opportunity. It is important for an investor to ask that individual whether he or she is licensed and whether the investment is registered with the SEC or with a state. Investors should confirm their answers with an objective source, such as the SEC’s Office of Investor Education and Advocacy or a state securities regulator. Importantly, promises of high or guaranteed profits with little or no risk are classic signs of fraud.
Investors should carefully review their entire financial situation, before making any investment decision, especially if a recipient of a lump-sum payment. The SEC reminds investors that a payment may have to help finance rebuilding and recovery as well as last one and his/her family for a long time.
The SEC’s publication, Ask Questions, discusses many of the other questions to ask anyone who wants you to make an investment.
SEC Investor Resources
Source: SEC.gov
Sep 21, 2018 | Consumer Protection, Employment & Technology Archive
The FTC announced that beginning September 21, 2018, consumers concerned about identity theft or data breaches can freeze their credit and place one-year fraud alerts for free.
Under the new Economic Growth, Regulatory Relief, and Consumer Protection Act, consumers in some states – those who previously had to pay fees to freeze their credit – will no longer have to do so.
Credit Freeze
A credit freeze, also known as a security freeze, restricts access to a consumer’s credit file, making it harder for identity thieves to open new accounts in the consumer’s name. The new law also allows parents to freeze for free the credit of their children who are under 16, while guardians, conservators, and those with a valid power of attorney can get a free freeze for their dependents.
In addition, the new law extends the duration of a fraud alert on a consumer’s credit report from 90 days to one year. A fraud alert requires businesses that check a consumer’s credit to get the consumer’s approval before opening a new account.
As part of its work to implement the new law, the Federal Trade Commission has updated its IdentityTheft.gov website with credit bureau contact information, making it easier for consumers to take advantage of the new provisions outlined in the law.
To place a credit freeze on their accounts, consumers will need to contact all three nationwide credit bureaus: Equifax, Experian, and TransUnion. Whether consumers ask for a freeze online or by phone, the credit bureau must put the freeze in place within one business day. When consumers request to lift the freeze by phone or online, the credit bureaus must take that action within one hour. (If consumers make these requests by mail, the agency must place or lift the freeze within three business days.)
Fraud Alert
To place a fraud alert, consumers need only contact one of the three credit bureaus, which will notify the other two bureaus.
According to the FTC, credit freezes and fraud alerts are two important steps consumers can take to help prevent identity theft. Identity theft was the second biggest category of consumer complaints reported to the FTC in 2017 — making up nearly 14 percent of all the consumer complaints filed last year. Consumers who believe they have been the victim of identity theft can report it and receive a personalized recovery plan at IdentityTheft.gov.
For more information, see “New Credit Law FAQs” and “Extended Fraud Alerts and Credit Freezes”
Source: FTC.gov
Aug 7, 2018 | Shareholder & Investor Protection
The SEC’s Office of Investor Education and Advocacy recently issued an Investor Bulletin containing the following basic, useful information about index funds:
What Is An Index Fund?
An “index fund” is a type of mutual fund or exchange-traded fund that seeks to track the returns of a market index. The S&P 500 Index, the Russell 2000 Index, and the Wilshire 5000 Total Market Index are examples of market indexes that index funds may seek to track.
A market index measures the performance of a “basket” of securities (e.g., stocks or bonds), which is meant to represent a sector of a stock market, or of an economy. One cannot invest directly in a market index, but because index funds track a market index, they provide an indirect investment option.
What Do Index Funds Contain?
Index funds may take different approaches to track a market index: some invest in all of the securities included in a market index, while others invest in only a sample of the securities included in a market index.
Market indexes often use a company’s market capitalization to decide how much weight that security will have in the index. Market capitalization (or “market cap”) is a measure of the total value of the company’s shares. The total value is equal to the share price times the number of shares outstanding. In a market-cap-weighted index, securities with a higher market capitalization value account for a greater share of the overall value of the index. Some market indexes, such as the Dow Jones Industrial Average, are “price-weighted.” In this case, the price per share will determine the weight of a security.
Some index funds may also use derivatives (like options or futures) to help achieve their investment objective.
How Do Index Funds Invest?
Generally, index funds have generally followed a passive, rather than active, style of investing. This means they aim to maximize returns over the long term by not buying and selling securities very often. In contrast, an actively managed fund often seeks to outperform a market (usually measured by some kind of index) by doing more frequent purchases and sales.
What Are The Costs Associated With Index Funds?
Because index funds generally use a passive investing strategy, they may be able to save costs. For example, managers of an index fund are not actively picking securities, so they do not need the services of research analysts and others that help pick securities. This reduction in the cost of fund management could mean lower overall costs to shareholders. However, keep in mind that not all index funds have lower costs than actively managed funds. Investors are reminded to always be sure to understand the actual cost of any fund before investing.
Fees and expenses reduce the value of one’sinvestment return. If the holdings of two funds have identical performance, the fund with the lower cost generally will generate higher returns for the investor. For more information, see Updated Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio
What Are Some Risks Of Index Funds?
Like any investment, index funds involve risk. An index fund will be subject to the same general risks as the securities in the index it tracks. The fund may also be subject to certain other risks, such as:
Lack of Flexibility. An index fund may have less flexibility than a non-index fund to react to price declines in the securities in the index.
Tracking Error. An index fund may not perfectly track its index. For example, a fund may only invest in a sampling of the securities in the market index, in which case the fund’s performance may be less likely to match the index.
Underperformance. An index fund may underperform its index because of fees and expenses, trading costs, and tracking error.
Some Things To Keep In Mind Before Investing In A Fund
The SEC recommends that investors carefully read all of the fund’s available information, including the fund’s prospectus and most recent shareholder report. Importantly, funds disclose their portfolio holdings quarterly in Form N-Q and shareholder reports. Usually, this information can be obtained from the fund’s website or one’s financial professional, as well as on EDGAR.
Asking the following questions may help:
What fees and expenses can I expect to pay for buying, owning, and selling this fund?
What specific risks are associated with this fund?
How is the makeup of the fund’s index determined?
How does the fund’s investment strategy fit with my investment goals?
NOTE: In recent years, new types of index funds that track custom-built indexes or benchmarks have become more common. The information provided in the SEC’s investor bulletin may not apply to “non-traditional” index funds, and the SEC encourages investors to review Investor Bulletin: Smart Beta, Quant Funds and other Non-Traditional Index Funds for more information about non-traditional index funds.
Source: Investor.gov
Jun 28, 2018 | Archive
On June 28, 2018, the SEC announced that it voted to propose amendments to the rules governing its whistleblower program. The whistleblower program was established in 2010 to incentivize individuals to report high-quality tips to the SEC and help the SEC detect wrongdoing and better protect investors and the marketplace.
Original information provided by whistleblowers has led to enforcement actions in which the SEC has ordered over $1.4 billion in financial remedies, including more than $740 million in disgorgement of ill-gotten gains and interest, the majority of which has been, or is scheduled to be, returned to harmed investors.
The proposed rules, according to the SEC, would, among other things, provide the SEC with additional tools in making whistleblower awards to ensure that meritorious whistleblowers are appropriately rewarded for their efforts, increase efficiencies in the whistleblower claims review process, and clarify the requirements for anti-retaliation protection under the whistleblower statute.
The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register.
SEC Whistleblower Program Background
Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 21F to the Securities Exchange Act of 1934 (the “Exchange Act”), establishing the SEC’s whistleblower program. Among other things, Section 21F authorizes the SEC to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful SEC enforcement actions resulting in monetary sanctions over $1 million and successful related actions. Awards must be made in an amount equal to 10 to 30 percent of the monetary sanctions collected.
Congress established a separate fund at the Treasury Department, called the Investor Protection Fund (IPF), from which whistleblower awards are paid. Since the whistleblower program’s inception, the SEC has ordered over $266 million in 50 awards to 55 whistleblowers, including individuals filing jointly, whose information and cooperation assisted the SEC in bringing successful enforcement actions.
The proposed whistleblower rule amendments would make certain modifications and clarifications to the existing rules, as well as several technical amendments.
Highlights of the Proposed Whistleblower Rule Amendments
Additional Tools in Award Determinations
Allowing awards based on deferred prosecution agreements (“DPAs”) and non-prosecution agreements (“NPAs”) entered into by the U.S. Department of Justice (“DOJ”) or a state attorney general in a criminal case, or a settlement agreement entered into by the SEC outside of the context of a judicial or administrative proceeding to address violations of the securities laws: This proposed amendment will ensure that whistleblowers are not disadvantaged because of the particular form of an action that the SEC, DOJ, or a state attorney general acting in a criminal case may elect to pursue.
Currently, the SEC’s whistleblower rules do not address whether the SEC may pay a related-action award when an eligible whistleblower voluntarily provides original information that leads to a DPA or NPA entered into by DOJ or a state attorney general in a criminal proceeding. Under the proposed amendment, the SEC would be able to make award payments to whistleblowers based on money collected as a result of such DPAs and NPAs, as well as under settlement agreements entered into by the SEC outside of the context of a judicial or administrative proceeding to address violations of the securities laws.
Additional considerations for small and exceedingly large awards:
- Historically, over 60% of the awards given out in the SEC whistleblower program have been less than $2 million. In the context of potential awards that could yield a payout of less than $2 million to a whistleblower, the proposed rules would authorize the SEC in its discretion to adjust the award percentage upward under certain circumstances (subject to the 30% statutory maximum) to an amount up to $2 million. In exercising its discretion to increase an award under this provision, the SEC would consider whether the increase helps to better achieve the program’s objectives of rewarding meritorious whistleblowers and sufficiently incentivizing future whistleblowers who might otherwise be concerned about the low dollar amount of a potential award.
- The proposing release also includes a general inquiry for public comment regarding whether the SEC could establish a potential discretionary award mechanism for SEC enforcement actions that do not qualify as covered actions (because they do not meet the more than $1 million threshold requirement), are based on publicly-available information, or where the monetary sanctions collected are de minimis.
- Forty percent of the aggregate funds paid by the SEC to whistleblowers have been paid out in only three awards. In the context of potential awards that could yield total collected monetary sanctions of at least $100 million, the proposed rules would authorize the SEC in its discretion to adjust the award percentage so that it would yield a payout (subject to the 10% statutory minimum) that does not exceed an amount that is reasonably necessary to reward the whistleblower and to incentivize other similarly situated whistleblowers. However, in no event would the award be adjusted below $30 million. This proposed amendment is intended to make sure that the SEC is a responsible steward of the public trust while continuing to provide strong whistleblower incentives.
- Elimination of potential double recovery under the current definition of “related action”: This proposed amendment would prevent the irrational result that could occur if a whistleblower could receive multiple recoveries for the same information from different whistleblower programs. The proposed amendment would clarify that a law-enforcement or separate regulatory action would not qualify as a “related action” if the SEC determines that there is a separate whistleblower award scheme that more appropriately applies to the enforcement action.
Uniform Definition of “Whistleblower”
The SEC also proposes rule amendments in response to the United States Supreme Court’s recent decision in Digital Realty Trust, Inc. v. Somers. In that decision, the Supreme Court held that the whistleblower provisions of the Exchange Act require that a person report a possible securities law violation to the SEC in order to qualify for protection against employment retaliation under Section 21F. The Supreme Court thus invalidated the SEC’s rule interpreting Section 21F’s anti-retaliation protections to apply in cases of internal reports.
The proposed rules would modify Rule 21F-2 so that it comports with the Supreme Court’s holding by, among other things, establishing a uniform definition of “whistleblower” that would apply to all aspects of Exchange Act Section 21F—i.e., the award program, the heightened confidentiality requirements, and the employment anti-retaliation protections. For purposes of retaliation protection, an individual would be required to report information about possible securities laws violations to the SEC “in writing”. To be eligible for an award or to obtain heightened confidentiality protection, the additional existing requirement that a whistleblower submit information on Form TCR or through the SEC’s online tips portal would remain in place.
Increased Efficiency in Claims Review Process
Two further proposed changes are designed to help increase the SEC’s efficiency in processing whistleblower award applications.
- Proposed new subparagraph (e) to Exchange Act Rule 21F-8 would clarify the SEC’s ability to bar individuals from submitting whistleblower award applications where they are found to have submitted false information to the SEC, as well as to afford the SEC with the ability to bar individuals who repeatedly make frivolous award claims in SEC actions. To prevent repeat submitters from abusing the award application process, the proposed rule would permit the SEC to permanently bar any applicant from seeking an award after the SEC determines that the applicant has abused the process by submitting three frivolous award applications.
- Proposed new Exchange Act Rule 21F-18 would afford the SEC with a summary disposition procedure for certain types of likely denials, such as untimely award applications, applications that involve a tip that was not provided to the SEC in the form and manner that the rules require, and applications where the claimant’s information was never provided to or used by SEC staff responsible for the investigation. The proposed summary disposition procedures would help facilitate a more timely resolution of such relatively straightforward denials, while freeing up staff resources to focus on processing potentially meritorious award claims. As under current rules, Claimants would have an opportunity to contest a preliminary denial of their claim before the SEC makes its final determination.
Clarification and Enhancement of Certain Policies and Procedures
The proposed amendments would clarify and enhance certain policies, practices, and procedures in implementing the program. These recommendations include the items listed below.
- Proposed revisions to Exchange Act Rule 21F-4(e) to clarify the definition of “monetary sanctions” so that it codifies the SEC’s current understanding and application of that term.
- Proposed revisions to Exchange Act Rule 21F-9 to provide the SEC with additional flexibility to modify the manner in which individuals may submit Form TCR (Tip, Complaint or Referral).
- Proposed revisions to Exchange Act Rule 21F-8 to provide the SEC with additional flexibility regarding the forms used in connection with the whistleblower program.
- Proposed amendment to Exchange Act Rule 21F-12 to clarify the list of materials that the SEC may rely upon in making an award determination.
- Proposed amendment to Rule 21F-13 to clarify the materials that may comprise the administrative record for purposes of judicial review.
Interpretive Guidance
In addition to the foregoing proposed rule amendments, the SEC is publishing proposed interpretive guidance to help clarify the meaning of “independent analysis” as that term is defined in Exchange Act Rule 21F-4 and utilized in award applications. Under the proposed guidance, in order to qualify as “independent analysis,” a whistleblower’s submission must provide evaluation, assessment, or insight beyond what would be reasonably apparent to the SEC from publicly available information.
What’s Next with the Proposed Amendments?
The proposal seeks public comment and data on a broad range of issues relating to the whistleblower program. After careful review of the comments, the SEC will consider what further action to take on the proposal.
Do You Qualify as An SEC Whistleblower?
If you voluntarily provide original, high-quality information (i.e., information derived from your independent knowledge, NOT facts derived from publicly-available information) about the possible violation of the federal securities laws that has occurred, is ongoing or is about to occur AND which leads to a successful SEC enforcement action, resulting in an order of monetary sanctions exceeding $1 million, then you MAY be eligible for an SEC whistleblower award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by certain other regulatory and law enforcement authorities.
Remember, information is voluntarily provided if you provide information to the SEC or another regulatory or law enforcement authority before a) the SEC requests it from you or your lawyer or b) Congress, another regulatory or enforcement agency or self-regulatory organization asks you to provide the information in connection with an investigation or certain examinations or inspections.
Can You Submit Information Anonymously to the SEC?
Yes, however, if you wish to submit information to the SEC anonymously, you MUST be represented by an attorney in connection with the anonymous information submission to be eligible for an award.
What Kind of Wrongful Conduct Is of Interest to the SEC?
Examples of the kind of conduct about which the SEC is interested include:
- Ponzi scheme, Pyramid Scheme, or a High-Yield Investment Program
- Theft or misappropriation of funds or securities
- Manipulation of a security’s price or volume
- Insider trading
- Fraudulent or unregistered securities offering
- False or misleading statements about a company (including false or misleading SEC reports or financial statements)
- Abusive naked short selling
- Bribery of, or improper payments to, foreign officials
- Fraudulent conduct associated with municipal securities transactions or public pension plans
- Other fraudulent conduct involving securities
SEC Investigations and The Federal Securities Laws
The SEC conducts investigations into possible violations of the federal securities laws. Again, the more specific, credible, and timely a whistleblower tip, the more likely it is that the tip will be forwarded to SEC investigative staff for further follow-up or investigation. For example, if the tip identifies individuals involved in the scheme, provides examples of particular fraudulent transactions, or points to non-public materials evidencing the fraud, the tip is more likely to be assigned to SEC Enforcement staff for investigation.
It is important to keep in mind that the SEC does not have jurisdiction to take action on information that is outside the scope or coverage of the federal securities laws. The SEC may, in appropriate circumstances, refer your matter to another regulatory or law enforcement agency.
Attorney Involvement in SEC Whistleblower Matters
As one former Director of the SEC’s Division of Enforcement has stated:
One thing I get asked about a lot is how [the SEC] view[s] whistleblower counsel. It will come as no surprise . . . that we welcome the involvement of counsel in whistleblower tips. While whistleblowers can engage with [the SEC] without the assistance of counsel, counsel experienced in whistleblower representations can help with up-front triage of tips to identify those that have a nexus with the federal securities laws and that may have merit. And [attorneys] can work with whistleblowers going forward to identify information that will be important to us and that will allow us to advance [SEC] investigations.
The same SEC Enforcement official also highlighted that attorneys for whistleblowers can help manage client expectations regarding the length of SEC investigations and the awards process; help determine whether the whistleblower can furnish corroborating information to support a securities fraud tip; and, if necessary, segregate information and engage in discussions with SEC officials to prevent unnecessary disclosure of information protected by the attorney-client privilege or work product doctrine and, thereby, help minimize any negative impact on, or substantial delay of, an SEC investigation. Additionally, whistleblowers and their attorneys can assist the SEC maintain the confidentiality of whistleblowers by identifying any facts or documents that they are furnishing that, potentially, could identify the whistleblower.
Do You Have Questions or Concerns About Providing Information to the SEC About Securities Fraud?
If so, please know that Kehoe Law Firm’s legal team understands the issues associated with making the difficult decision to voluntarily come forward with information about securities fraud or other wrongdoing. Moreover, the Firm’s legal staff has extensive experience investigating and prosecuting fraud, as well as interacting with sources of information, especially brave, honest individuals who are willing to expose fraud committed against the United States government.
If you have questions or concerns about voluntarily providing information as a whistleblower to the SEC about violations of the federal securities laws, including questions about whistleblower award eligibility or the form and manner in which the information is required to be provided to the SEC, please contact Kehoe Law Firm, P.C. by completing the form above on the right or sending an e-mail to [email protected]. If you prefer to speak privately with an attorney, please contact either Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, or John Kehoe, Esq., [email protected], (215) 792-6676, Ext. 801.
Please see Frequently Asked Questions, Submit a Tip, Claim an Award, Final Orders, and Section 21F of the Securities Exchange Act of 1934 (Securities Whistleblower Incentives and Protection) for additional Whistleblower Program information.
Source: SEC.gov
