Authored by Alex Passantino

Today, the DOL’s Wage & Hour Division (WHD) sent its anticipated Request for Information (RFI) on the overtime rule to the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA). Review of the RFI by OIRA is one of the final steps before publication in the Federal Register.

The RFI is expected to ask the regulated community for information regarding the impact of last year’s final rule increasing the salary level for exemption to $913/week. As our readers know, that rule was enjoined and the injunction is now before the Fifth Circuit Court of Appeals, with the Department’s reply brief due later this week. The RFI is likely to ask employers that made adjustments to their pay or operations in anticipation of the expected salary increase what the economic consequences of those adjustments have been thus far. Similarly, for employers that did not implement planned changes, the RFI likely will inquire as to what the expected consequences would have been.

Employer responses to the RFI will be critical in assisting WHD in determining next steps in the regulatory process (e.g., withdrawing the final rule, making a new proposal with a different salary level, maintaining the status quo). Be on the lookout for additional information on how to participate.

Opportunity AheadAuthored by Alex Passantino

During his Wednesday hearing before a House Appropriations Subcommittee, in which he addressed the Trump Administration’s proposed budget for DOL, Secretary Alexander Acosta informed the committee that the Department planned to issue a Request for Information (RFI) regarding the currently enjoined overtime rules. The anticipated timetable is 2-3 weeks, but it is unclear whether that represents the timetable before the RFI is submitted to the Office of Management and Budget for review and approval or actual publication.

An RFI is a “pre-rulemaking” procedure during which an administrative agency, such as DOL, asks the regulated community for input on a topic or topics. For example, in 2006, the Wage and Hour Division published an RFI on the Family and Medical Leave Act. The results of the employer and employee responses were published in a report in 2007. The responses also were used to inform the Department’s proposed regulation in 2008, which became effective in 2009.

An RFI on the overtime rule likely would ask questions about the economic (or anticipated) impact of the Department’s increase to the minimum salary level required for exemption. Although it undoubtedly will solicit input from all affected employers and employees, it may ask specific questions about the rule’s impact on not-for profits, state and local governments, and small businesses (or at least the impact it was expected to have). The responses to the Department’s RFI will provide it with real-world data points regarding the actual impact of the rule, which will allow it to better determine how to proceed—in the pending litigation as well as in any rulemaking efforts.

It will, therefore, be critical for employer voices to be heard. We will provide additional information on the RFI—including how best to respond—as it becomes available.

Authored by Alex Passantino

On June 7, Department of Labor Secretary Alexander Acosta announced the withdrawal of the DOLs 2015 and 2016 Administrator Interpretations (AIs) on joint employment and independent contractors. These documents were statements of the Wage & Hour Division’s interpretations of the FLSAs (and Migrant and Seasonal Agricultural Worker Protection Act’s) definitions of employ, employer, and employee. The withdrawal does not change the law; it simply removes as the DOLs position those statements made in the AIs.

The withdrawal likely indicates a changing focus in the Department’s enforcement efforts away from the “fissured” industry initiative of the Obama Administration. We may get additional insight when Secretary Acosta testifies before the House Labor appropriations subcommittee to discuss the Trump Administration budget.

Authored by Cheryl A. Luce

Seyfarth Synopsis: On May 25, 2017, Noah Finkel spoke at our full-day summit about what to expect from the DOL under the new administration. Noah’s forecast: “They say that the policy is the people, and we don’t yet have the people.” We have a Secretary of Labor and an interim Solicitor of Labor, but are still waiting for the President to fill the two most important wage and hour law positions: the Administrator and Deputy Administrator of the Wage and Hour Division (“WHD”). While we wait to see who will be at the WHD’s helm, we should not expect any policy changes from the WHD, but should continue to be vigilant about developments in the courts.

Enforcement Efforts Expected to Remain the Same

WHD, the enforcement arm of the DOL, is not very political and does not tend to change directions when new leaders take over. WHD investigators focus most of their efforts on individual complaints—not on targeted investigations that follow top-down DOL initiatives. This is likely to continue, and we can expect the number of investigations to remain stable. The Obama administration increased the investigator headcount of the WHD from 700 to 1,000, and there is no proposed budget cut that makes us suspect that the headcount will wane. One possible change on the enforcement front: the Trump administration is unlikely to continue the Obama administration’s focus on certain areas (e.g., the hospitality world and fissured industries).

The New Salary Rules Likely to Remain in Limbo for 2017

The new salary rules that would have increased the salary threshold for white collar exempt employees (sometimes referred to as the new overtime rules) are in limbo. The rules, which were set to go in effect December 1, 2016, remain enjoined by a Texas court while the DOL appeals to the Fifth Circuit. The DOL, through the Acting Solicitor of Labor, has requested several extensions on briefing the appeal. We can expect the DOL to continue seeking extensions until at least as long as it takes to fill the Solicitor of Labor position on a non-interim basis and the vacant WHD Administrator positions.

If the Fifth Circuit affirms the injunction, it could invalidate not only the minimum salary level, but the salary basis test as well. Elimination of that test would provide employers and exempt employees with more freedom around schedules and pay. The DOL could also withdraw the rule and retain the old salary rules. If the injunction is overturned and the new salary basis rules remain in place, we expect that WHD may propose a middle ground, g., something higher than the $455 per week set by the old rules, yet lower than $913 per week. For 2017, employers should not expect any new requirements.

Courts Will Drive Changes to Joint Employer and Independent Contractor Tests

We expect courts to be the primary drivers of change affecting joint employment and independent contractor standards. We’ve blogged about expectations of the new Secretary of Labor here, and while the DOL does not actually make the law, its guidance and interpretations can influence courts. The Obama DOL attempted to broaden the employment relationship with respect to both joint employment and independent contractor classification. For example, the Obama DOL changed the joint employment analysis from “actual control” to “right to control.” It also shifted the focus of whether a worker should be classified as an independent contractor away from the degree to which the business controls the work and instead focused on the economic realities of the relationship, while also stating that most workers should be employees (a position we do not believe the new administration will follow, but it remains to be seen).

In this area, most of the risk comes from the courts themselves. Earlier this year, the U.S. Court of Appeals for the Fourth Circuit issued the broadest definition of joint employment that we’ve seen and held that unless two entities are completely disassociated with each other, they are joint employers under the FLSA. To minimize risks, we advise continuing to watch how the courts rule on this issue rather than waiting for new DOL guidance.

Opinion Letters Could Return

A glimmer of hope in the new administration is that WHD opinion letters could return. For decades, these opinion letters provided helpful guidance to both employers and employees in how to comply with the FLSA. The Obama administration stopped issuing WHD opinion letters in 2009. We hope to see a return of these. A return of opinion letters also may present employers an opportunity to receive guidance from a WHD that, when its positions are filled, may be more sympathetic to employers’ positions. This, or other forms of interpretive guidance, could be helpful on a number of technical issues—tip credit rules, the fee basis of payment, or interpretation of the fixed salary for fluctuating hours pay plan—on which the WHD under the Obama administration took unfriendly positions.

We’re Keeping Our Eyes on the Courts

Under the new administration, a lot is left up in the air, but as before, most of the risks come from the courts, and the cases plaintiffs’ counsel file in them. We’ve got our eyes on them and will continue to report on key decisions and other wage and hour developments.

Co-authored by Brett Bartlett and Kevin Young

Seyfarth Synopsis:  Last Thursday, the Senate confirmed Alexander Acosta as the 27th United States Secretary of Labor. Filling the final post in President Trump’s cabinet, Acosta will lead a Department of Labor that has, since inauguration, operated without political leadership in the Secretary role. With Secretary Acosta in place, the DOL now has a leader to advance the new administration’s agenda. Here, we offer a brief introduction to Secretary Acosta, as well an overview of the action and opportunity employers may expect on the wage and hour front over the next few months.

Who is Alexander Acosta?

Secretary Acosta is a Florida native and son of Cuban immigrants. After graduating from Harvard Law School in 1994, he clerked for now-Justice Samuel Alito, then a federal appellate judge for the Third Circuit. After spending several years in private practice, he turned to public service, first as a member of the NLRB, next as the civil rights chief at the Department of Justice, and then as the U.S. Attorney for the Southern District of Florida. Since 2009, he has served as Dean of the Florida International University College of Law.

Secretary Acosta is known to be intelligent, thoughtful, and experienced in political matters. Through years of public service, he has demonstrated an interest in protecting the rights of non-majority individuals. Compared to some of President Trump’s other cabinet nominations, he drew only light opposition during the confirmation process, with comparatively bi-partisan support and a confirmation vote of 60 to 38.

Expectations in the Wage and Hour World.

We expect Secretary Acosta to move quickly on several fronts. First, the Secretary will begin filling pivotal DOL roles that have remained vacant since President Trump took office—among them, the Wage and Hour Division’s Administrator and the Solicitor of Labor (which has been filled on an acting basis).

Second, Secretary Acosta will likely turn his attention to critical DOL initiatives that have been in limbo since the election, including the new overtime exemption rules that were temporarily enjoined by a federal district court in Texas just before their December 1, 2016 effective date. Even as they have languished before the Fifth Circuit following the Obama administration’s appeal of the injunction order, the rules have been a major source of consternation for employers. Secretary Acosta can now take careful steps to determine an exit from the litigation that has stuck the new rules in procedural purgatory, while at the same time assessing future changes to the exemption rules.

Third, once a new Administrator is in place, we expect a clearer message around the Wage and Hour Division’s enforcement and education policies, which have remained fairly static since the end of 2016. We would not be surprised to see the Division reduce its focus on widespread investigations and liquidated damages, which became more common in the last administration, and reopen its doors to working with employers to ensure compliance. This could to a renewal of the process by which employers may seek an Administrator’s opinion letter, which can provide an absolute defense against claims challenging the practices covered by the letter.

Potential Opportunities for Employers?

Employers should pay attention to the new Secretary’s first steps in this new administration, especially to the team that he nominates to be confirmed by Congress. While we do not expect sub-regulatory agencies like the Wage and Hour Division to stop enforcing the laws they are empowered to oversee, we do anticipate that an Acosta-led DOL will present fresh opportunities to address and ensure compliance in a less hostile regulatory environment.

Parting Thoughts.

While it’s difficult to know the exact steps that Secretary Acosta will take to advance the new administration’s agenda, it seems clear that the next few months could be quite momentous at the DOL. Not only do we expect increased clarity into how the DOL will operate under new leadership, but we believe the changes that the DOL makes may create new opportunities for employers seeking to proactively ensure compliance with the various laws that the DOL enforces. We will, of course, continue to keep our readers apprised of the latest developments.

 

Authored by Sheryl Skibbe

On Wednesday, the Fifth Circuit Court of Appeals granted the Justice Department’s additional unopposed request for a 60-day extension to figure out its position on the new FLSA overtime exemption rules.

The stated reason for the government’s unopposed request was to “allow incoming leadership personnel adequate time to consider the issues.” Nevada v. DOL, No. 16-41606, Motion For Extension to File Reply (Feb. 17, 2017).

Presumably, the request for additional time is to permit the Senate to confirm the Trump administration’s new Labor Secretary, Alexander Acosta, and let him weigh in on the new rules. But the extension runs only to May 1, and it is not clear that the Senate could confirm Mr. Acosta and permit him to guide the government’s position by this new deadline.

Meanwhile, the district court in Texas is still considering the business groups’ motion for summary judgment to permanently invalidate the new rules and the Texas AFL-CIO’s motion to intervene in the case. A decision granting the summary judgment motion could moot the appeal if the district court enters a permanent injunction before the Fifth Circuit rules.

capitol from afarAuthored by Emily Barker

President Trump’s pick for Labor Secretary, Andrew F. Puzder, has withdrawn his name from consideration. Support for Puzder had eroded quickly over the last week.

To secure his appointment, Puzder needed at least 50 Senate votes plus a possible tie-breaking vote from Vice President Pence. Republicans control 52 seats in the Senate. Puzder withdrew from consideration when, by Wednesday morning, it was being reported that there were at least four firm no-votes coming out of the GOP, perhaps as many as 12.

It is still unclear who Trump’s replacement pick will be, but the timing of Puzder’s withdrawal will have implications for whoever takes his place. As we previously reported, a judge has entered an order temporarily enjoining the DOL from implementing the new overtime exemption rule that was set to go into effect on December 1, 2016. The DOL appealed the order to the Fifth Circuit, which granted an expedited briefing schedule. The DOL’s reply brief is due on March 2, 2017, but no hearing date has been set. It was expected that Puzder would be confirmed prior to either date, and that his appointment might affect the DOL’s position in the matter. His withdrawal likely means the briefing will be finalized, and perhaps the Fifth Circuit will have ruled, before a new Labor Secretary can weigh in.

Authored by Kevin Young

Will the Department of Labor’s new overtime rule go into effect? When will a new Secretary of Labor be confirmed? We don’t have the answers just yet, but a lot has happened over the last few weeks to inch us closer. As things heat up, we wanted to update our readers on all the latest.

Where Do Things Stand in the Fifth Circuit?

As our readers know, Judge Amos Mazzant, a federal judge for the Eastern District of Texas, entered an order preliminarily enjoining the DOL’s new overtime rule on November 21, 2016, just days before the rule was set to take effect. The government (i.e., the defendants in the Texas litigation) appealed the order to the Fifth Circuit ten days later.

Early in the appeal, the government convinced the Fifth Circuit to address the appeal on an expedited basis. Under that schedule, briefing would have ended this week.

Under a new administration, however, the government subsequently filed an unopposed motion to extend the same briefing schedule that it previously sought to expedite so that it could reconsider the positions it has taken thus far. Late last week, the Fifth Circuit granted the motion, extending the briefing schedule to March 2.

Many employers want to know when the appeal will be decided. The answer remains unclear. Under the expedited schedule, the appeal would have been fully briefed this week and oral argument, if any, likely would’ve taken place within the next two or three months. All of that is pushed back now. Moreover, with all signals suggesting the DOL’s presumptive new leadership will take a different approach, the likelihood of there being an appeal to be orally argued is lower today than it was a few weeks ago.

How About the Rest of the Case in the Eastern District of Texas?

While many have turned their focus to the Fifth Circuit appeal of District Judge Mazzant’s preliminary injunction order, there remain two fully-briefed motions before the judge, either of which could have an enormous impact on the case: (1) the AFL-CIO’s motion to intervene as a co-defendant to defend the new rule; and (2) the business and state government plaintiffs’ motion for summary judgment.

If the AFL-CIO is permitted to intervene as a defendant, it could become more difficult for the plaintiffs to work with the government to end the proceedings altogether (which the parties might do if the union were not involved). Even if the government wanted to lay down its shield and settle the case, the AFL-CIO would still be there to defend the new rule. It’s important to note that an order denying intervention would be immediately appealable.

The plaintiffs’ summary judgment motion could be even more impactful. If the district court grants the motion, that would end the case: the new rule would be invalidated, the litigation would end, and the AFL-CIO would have no case to defend. Sure, an order granting summary judgment can be appealed—but who is going to file the appeal? It’s hard to imagine the new DOL leadership (or anyone else in the new administration) doing so. And it’s too soon to say whether the AFL-CIO would go it alone.

Speaking of DOL Leadership, When Will We Have a New Labor Secretary and How Might That Impact the Litigation?

Secretary of Labor nominee Andrew Puzder’s confirmation hearings have been pushed from Thursday, February 2 to Tuesday, February 7. With that delay, the extension obtained in the Fifth Circuit is more important, as it will give Mr. Puzder additional time to get through confirmation, land in office, and execute on any plans concerning the overtime exemptions.

While Mr. Puzder’s immediate priorities are not yet known, the public certainly has insights into his views on core issues, including the new overtime rule. After all, Mr. Puzder has been a prominent commentator on wage and hour issues, including on his blog; in his book, Job Creation: How It Really Works and Why Government Doesn’t Understand It; and in the press.

Based on prior statements, Mr. Puzder certainly seems to share the new administration’s view of an over-regulated labor market, with the new overtime rule being a prominent example. He wrote in a May 18, 2016 opinion column for Forbes:

The real world is far different than the [DOL]’s Excel spreadsheet. This new rule will simply add to the extensive regulatory maze the Obama Administration has imposed on employers, forcing many to offset increased labor expense by cutting costs elsewhere. In practice, this means reduced opportunities, bonuses, benefits, perks and promotions.

And with respect to the federal minimum wage, Mr. Puzder has signaled possible support for an increase, but certainly not to the double-digit threshold that many advocates have lobbied for (and successfully achieved in various cities and states). He explained to Fox Business on May 31, 2016:

 [Those demanding a $15 minimum wage] should really think about what they’re doing. There are solutions to this problem, and increasing the minimum wage is not the best solution. If we are going to increase the minimum wage at all, we’ve got to keep a lower minimum wage for entry-level workers, or these people are just going to be shut out of the workforce….The [Congressional Budget Office] came out with a report last year that said you could raise the minimum wage to about $9 without much impact on jobs, and you probably could do that….

Parting Thoughts.

While it’s difficult to know how all of this will unfold, it seems clear that the next couple months could be quite momentous at the district court level, the appellate level, and in Washington, D.C., where new DOL leadership should soon take the helm. We at the Wage & Hour Litigation Blog will, of course, continue to keep our readers apprised of the latest developments.

Authored by Alex Passantino

It’s the week before Christmas; ’16’s nearly done.
As we sit back and ponder the Year of 541.
The journey’s been long; it’s taken some time.
What’s happened thus far? Let us tell you in rhyme.

As the year drew anew, we sat with breath bated,
While within DOL they discussed and debated.
Should we take our proposal and set it on fire?”
“Take the percentage of time test and set the bar higher?”

“No, we meant what we said and we said what we meant,
We’ll still increase the salary, but we’ll change the percent.”
“Messing with duties will cause us nothing but trouble,
So just take the old salary, and make the new one be . . . double.”

From the moment it published, the rule came under attack.
Even Congress started plotting to take it all back.
But summer it came, then autumn did too.
And raises or OT would be in on 12/2.

With communications all drafted . . . maybe one last correction,
The narrative changed with November’s election.
Might the rules be undone by a Trump Administration?
Or would December’s due date cause such plans great frustration?

We considered . . . while preparing for our Turkey Day function,
When a court in East Texas stopped the rules by injunction.
A week before kickoff. For some ‘twas too late.
For others, they scooped up their plans and yelled “Wait!”

With more motions, appeals, and attempts to intervene,
We look at it all and ask “What does this mean?”
There’s gossip, speculation, and some wack-a-doo theories.
Apropos for a year when the Cubs won the Series.

We’ll know when we know, maybe a few days before.
More excitement is what ‘17 has in store.
But before we look forward, we’ll take one last look back.
Because wage-hour issues this year did not lack.

Some employers may feel there’s less cause for concern
When facing a lawsuit filed by an intern.
And as they consider which students their program will host,
Pay special attention to who benefits most.

California, of course, continued its wage-hour saga.
Whether sitting or standing or some thing they call PAGA.
And if plaintiffs have no trial plan, make sure you get your shots in,
Before calculating piece rate using IBM’s Watson.

Turning back east, we recall how DOL’s year went,
Beginning with January’s missive about joint employment.
A description of vertical and horizontal relations,
Should it “meet with an accident,” there’ll be standing ovations.

Spring brought a trip to SCOTUS for the service advisor.
DOL changed the reg; its explanation? “We’re wiser.”
But for positions the agency has held very long,
The Supremes told the Department “Hey, you’re doing it wrong.”

The rest of the year deserves more time to expound.
From exempt underwriters to permission to round.
And here’s hoping that someday the world will just get it,
And create a singular rule that involves the tip credit.

Decertification. Half-time. Franchise compliance.
A wide breadth of issues that appear with reliance.
But the future’s a mystery, so with great anticipation,
Happy New Year, and Thank You — Love, wagehourlitigation.

SDFLAuthored by Christopher Kelleher and Noah Finkel

Seyfarth Synopsis: Federal court denies motion for conditional certification for a proposed class of employees working at separate Subway franchises.

Earlier this year, the DOL’s Wage-Hour Division issued a much-publicized Administrator Interpretation on what employers constitute joint employers, including an explanation of how two or more employers under common ownership can constitute “horizontal” joint employers.  As articulated by the WHD’s sweeping pronouncement, it appeared that virtually any jointly-owned entities might constitute joint employers, at least in the eyes of the WHD.

But in a victory for employers in the battle over joint employer status, a federal district judge in the Southern District of Florida recently denied a motion for conditional collective action certification for a group of Subway employees of different franchises with common ownership.  In Aguiar, et al. v. Subway 39077, Inc., Timothy E. Johnson, et al., plaintiff Yirandi Aguiar sought collective action certification for the overtime claims for all “Store Managers” working at approximately 38 Subway franchises owned and operated as separate corporate entities by Timothy Johnson in Southern Florida.

Applying the usual “fairly lenient standard” to determine whether conditional collective action  certification was warranted, the Court rejected Aguiar’s attempt to certify the collective on several levels.  First, the proposed collective was comprised of individuals employed by approximately 38 separate, non-party corporate entities.  Second, Aguiar only provided “Consent to Join” forms and affidavits from three individuals including herself, and thus failed to sufficiently show the existence of other employees who wished to opt into the action.

Third, and most significantly, even if Aguiar could satisfy these first two elements, the Court found that the putative plaintiffs were not similarly situated.  In making this determination, the Court noted that the individuals worked at separate corporate entities, and Aguiar did not show that she or other employees were authorized to sell or make sandwiches at any other of the 38 franchises.  Additionally, the franchises were spread throughout Southern Florida, and thus were not geographically concentrated.  And finally, Aguiar failed to provide information regarding a joint payroll department or joint supervision over the proposed collective action members.

This case demonstrates that even under the “lenient standard” described above, merely alleging common ownership over a number of franchises is not enough to show joint employment status or to obtain a broad conditional certification order.