Co-authored by Robert J. Carty, Jr., John Phillips, and Alex Passantino

Seyfarth Synopsis: On June 30, the Department of Labor filed its reply brief to support its appeal from a preliminary injunction that enjoined the DOL from implementing its 2016 revisions to the salary-level tests for determining applicability of the FLSA’s executive, administrative, and professional exemptions. In its reply, the government argues it had the authority to make those revisions. How the Fifth Circuit handles the appeal, now that it is fully briefed, will affect what happens from here in the lower court in ways that are difficult to predict.

As we reported last week, the Department of Labor finally filed a reply brief in its appeal of the preliminary injunction prohibiting it from implementing or enforcing its 2016 “Final Rule”—that is, its revisions to the FLSA regulation governing the executive, administrative, and professional (“EAP”) exemptions.

Over the last few days, we’ve been fielding lots of questions about what might happen next. Let’s try to game it out.

But first, we should set the stage. The plaintiffs asserted three main challenges to the Final Rule:

  1. The plaintiffs contested the DOL’s very authority to implement the rule’s salary-level requirement in the first place. The district court accepted this argument—at least with respect to the 2016 Final Rule—and found it unlawful in its entirety.
  2. The plaintiffs argued that the Final Rule’s new “indexing” feature violates the Administrative Procedures Act (“APA”) because it would automatically adjust the minimum salary requirements without any notice or comment period. The district court found the indexing feature unlawful, but only because it had already struck down the entire Final Rule; it expressly bypassed the APA arguments.
  3. The plaintiffs asserted a Tenth Amendment challenge claiming that the Final Rule cannot apply to state governments. The district court rejected this position.

On appeal, the DOL initially defended the Final Rule in all respects, including its $913 weekly minimum salary. Now working under the new administration, the DOL has narrowed its approach in its reply. Rather than continuing a full-throated defense of the previous administration’s Final Rule, the DOL has now limited its argument to one (and only one) issue; it also announced its intention to revisit the $913 minimum:

The Department has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be. Accordingly, the Department requests that the Fifth Circuit address only the threshold legal question of the DOL’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule.

This is definitely a plot twist, and our readers understandably want to know how it might affect the outcome of this appeal.

We won’t try to predict how the Fifth Circuit will rule on the basic “authority” question. But if it agrees with the district court’s reasoning, the path forward is clear: It will affirm, and the DOL may seek rehearing and/or Supreme Court review if it believes it necessary to preserve its long-asserted authority to set a salary level.

Things will get much more complicated if the Fifth Circuit overrules the district court and finds that the DOL acted within its authority. Here are a few thoughts on what might happen in that case:

  • On the current record, it is unlikely that the court would reach the plaintiffs’ APA challenge to the new “indexing” feature, since the parties’ appellate briefs expressly avoided that issue. That said, the court could request additional briefing on the issue, or could remand the case and instruct the district court to perform an APA analysis.
  • This raises the possibility that the court could find a middle ground. That is, it could find that the DOL generally has the authority to impose a salary-level test, but that the Final Rule exceeded that authority. In that case, the court would affirm the result while disagreeing with the district court’s reasoning.
  • The court might also consider the plaintiffs’ alternative argument that the Final Rule cannot apply to state governments under the Tenth Amendment. A victory on this point, though, would apply only to the 21 State Attorneys General plaintiffs, not the other plaintiffs (a coalition of non-governmental business groups) whose case has been intermingled with that filed by the Attorneys General.
  • If the Fifth Circuit sides with the DOL on all issues, it will reverse. The question will then become whether any of the plaintiffs’ claims can survive in the wake of whatever legal conclusions the court reaches. Various stakeholders have asked us whether the Fifth Circuit would render a defense judgment if it sides entirely with DOL. We wouldn’t expect such an outcome here, because this appeal involves a preliminary injunction, and certain issues are likely to remain (thus requiring further action by the district court). For example, one of the issues raised below (but not in the appeal) is whether the Final Rule is arbitrary and capricious; the Fifth Circuit’s ruling may not resolve that question. (The business plaintiffs have raised the issue in a motion for summary judgment, which is pending in the district court.)
  • We should also note that the Texas AFL-CIO has filed a motion to intervene, which has yet to be decided. The union wants to more strenuously defend the Final Rule than it believes the Trump Administration will. This may present additional loose ends that will have to be resolved in a remand

As we ponder the possible scenarios, we should also consider a few wildcards:

  • In its reply, the DOL expresses its intention to revisit the Final Rule in a new rulemaking. Indeed, as we reported last month, the agency has announced a plan to issue a Request for Information—a “pre-rulemaking”—related to the EAP exemption. There are no guarantees on what the DOL would do with the information it receives. It might help DOL defend its authority to set a salary level; it may also help DOL develop the basis for a future rulemaking. Depending on what the DOL does, it is possible that the case could become moot altogether—for example, if it proposes and finalizes a new rule before the case concludes.
  • The Fifth Circuit may conduct oral argument and/or request additional briefing. If it does, expect us to refine our views based on what unfolds.
  • The plaintiffs could seek to file a surreply in light of the DOL’s new, more limited position. Such a brief, if filed, might be instructive.
  • A settlement may be possible. It is unclear, however, where the plaintiffs come down on the “no authority” argument versus the argument that DOL exceeded its authority in 2016. This would be a critical sticking point in any negotiated resolution.

As we try to read these tea leaves, we hasten to repeat what we said last week: “What is certain at this time is that the future of the 2016 revisions remains uncertain.” Rest assured, we’ll be watching this appeal closely. As more information comes in, we’ll continue to post updates here. Stay tuned.

Co-authored by Brett Bartlett, Alex Passantino, and Kevin Young

At last, the federal government has filed its reply brief in the Fifth Circuit concerning its appeal from a Texas district court’s order preliminarily enjoining the 2016 revisions to the FLSA’s executive, administrative, and professional exemptions. Because of the substantive and procedural complexities facing the Department of Labor (and its newly seated Secretary, Alex Acosta), we would not have been surprised to see another request for more time to file this reply—though given the number of prior extensions, there was reason to wonder whether the Fifth Circuit would grant such a request.

The complexities, in a nutshell, revolved around several points:

  1. The fact that the lower court that issued the preliminary injunction justified its order, in part, with reasoning that would suggest that the DOL does not have and has never had the authority to set a salary level test for the EAP exemptions.
  2. Although the new Secretary of Labor and the Trump administration might not want the 2016 revisions to become effective with the $913/week salary level requirement, it would be difficult to argue against the revisions without supporting the lower court’s rescission of DOL rulemaking authority.
  3. If the DOL argued against the preliminary injunction (i.e., for its reversal), the Fifth Circuit might order that the 2016 revisions become effective, whether retrospectively or at some point in the future, in connection with a holding that the district court’s order was entirely unsalvageable.

Tough stuff. And we now know the DOL made a hard choice. The Department chose to argue that it absolutely has, and always has had, the authority to set a salary level test—it chose to argue that the lower court erred in enjoining the revised exemptions from going into effect.

The DOL’s argument is more nuanced than that, however. In the simplest of terms, it attempts to walk a tight line by urging the Fifth Circuit to find that the lower court erred by concluding that the DOL did not have the authority to set a salary level test at all, but to stop short of finding that the 2016 revisions are valid as written. Somewhat subtly, the DOL suggests that the appellate court should bless the Department’s ability to reconsider what the appropriate salary level should be. Here is what the DOL writes about that:

The district court did not determine whether the salary level set by the 2016 final rule is arbitrary and capricious or unsupported by the administrative record. Because the preliminary injunction rested on the legal conclusion that the Department lacks authority to set a salary level, it may be reversed on the ground that that legal ruling was erroneous. The Department has decided not to advocate for the specific salary level ($913 per week) set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be. Accordingly, the Department requests that this Court address only the threshold legal question of the Department’s statutory authority to set a salary level, without addressing the specific salary level set by the 2016 final rule. In light of this litigation contesting the Department’s authority to establish any salary level test, the Department has decided not to proceed immediately with issuance of a notice of proposed rulemaking to address the appropriate salary level. The rulemaking process imposes significant burdens on both the promulgating agency and the public, and the Department is reluctant to issue a proposal predicated on its authority to establish a salary level test while this litigation remains pending. Instead, the Department soon will publish a request for information seeking public input on several questions that will aid in the development of a proposal.

So where does this leave us? It is hard to predict what the Fifth Circuit will do with these arguments. The appellate court might hold oral argument. It doesn’t have to. We do not know, at this time, who the judges would be to hear the appeal. We cannot read the tea leaves based on the personal tendencies of the jurists, as a result. The court might find that the parties have provided sufficient information to allow an order based on the briefing alone. Even if it were to do that, we’d be looking at months, most likely, before we see a ruling.

And what then? The appeals court might find, as noted above, that the lower court’s order cannot stand in any way. That would create a chain of events that we all would hope to avoid. The court might, however, do as the DOL asks, reversing the preliminary injunction and giving instructions to the trial court about how to proceed. Perhaps that would open the door to some sort of compromise, which would bring its own complexities and challenges.

What is certain at this time is that the future of the 2016 revisions remains uncertain.

We will continue to monitor the situation.

Authored by Alex Passantino

In the second bit of wage hour news today, and in advance of Secretary Acosta’s hearing before a Senate Appropriations subcommittee, the Department of Labor announced the return of opinion letters. In 2010, the Obama Administration had eliminated the long-standing practice of issuing opinion letters in favor of Administrator Interpretations.

The Department’s announcement allows the regulated community to request formal guidance from the Wage & Hour Division on issues under its jurisdiction (e.g., FLSA, FMLA, Davis-Bacon, SCA). In some circumstances, an opinion letter may operate to bar or limit an employer’s liability for a wage-and-hour-related practice.

The Department has created a web page for the opinion letter process, containing guidance on items such as how to make a request. Not surprisingly, the Department states that it “will exercise discretion in determining which requests for opinion letters will be responded to, and the appropriate form of guidance to be issued.” Opinion letters are labor-intensive, and not every request will result in a response. As a result, employers should carefully consider the issues they believe will result in the greatest impact and make their request accordingly.

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.

Co-authored by Noah Finkel and Andrew Scroggins

Employers have faced questions about the enforceability of arbitration agreements with class and collective action waivers since the NLRB’s highly controversial D.R. Horton decision in 2012, which held that the waivers violate employees’ right to engage in protected concerted activity. The Fifth Circuit refused to enforce the decision, and other courts followed, but the NLRB refused to change course. In 2016, the Seventh and Ninth Circuits also adopted the NLRB’s view, as has the Sixth Circuit in 2017.

In January 2017, the U.S. Supreme Court agreed to hear the issue, consolidating cases from the Fifth, Seventh, and Ninth Circuits. Oral argument is scheduled to take place during its Fall 2017 term.

The tea leaves at the Supreme Court give many reason to believe that the NLRB’s position will be struck down. Newly-appointed Justice Neal Gorsuch is considered by many observers to be likely to follow the pro-arbitration stance of his predecessor, Justice Scalia. The Office of the Solicitor General recently reversed its position, filing an amicus brief in support of the employers that details the flaws it sees in the NLRB’s position and leaving the NLRB on its own to argue the case before the Court. And the appointment of new Board members and the end of the NLRB General Counsel Richard Griffin’s term in November 2017 raise the possibility the agency may revisit its position, thus eliminating any argument that courts should defer to the NLRB’s current position on the legality of class waivers.

Some, from both sides of the bar, speculate that if the Supreme Court rejects the D.R. Horton theory nearly all well-advised employers seeking to minimize their risks will adopt mandatory arbitration programs with class waivers, and that wage-hour litigation as we know it will be over. That hope/fear, however, may be overstated.

This post is the first of several that will consider what the future may hold if employers find themselves confident that they will be able to issue enforceable, mandatory arbitration programs containing class and collective waivers. To what extent will the wage-hour class and collective action landscape change?

A recent Sixth Circuit decision, Taylor v. Pilot Corporation, et al., provides a glimpse into one part of the future. The employer had in place an arbitration agreement with a collective action waiver that applied to most, but not all, of its 50,000 hourly employees. One of the employees who was not bound by the agreement filed an FLSA collective action alleging that she had not been paid for all of her overtime hours. She asked the court to authorize sending notice of conditional certification to those “similarly situated” to her, which she contended included all 50,000 hourly employees.

The employer protested that the plaintiff was not similarly situated to the tens of thousands of employees bound by the arbitration agreement. After all, even if those employees opted in to the suit, the court would lack subject matter jurisdiction, and their claims would be dismissed and sent to arbitration. The district court disagreed, reasoning that it would determine whether the arbitration agreements were enforceable only after learning who had opted-in to the litigation. Notice to all 50,000 hourly employees was approved. The decision was affirmed on appeal, with the Sixth Circuit concluding it did not have jurisdiction to consider questions about the enforceability of the arbitration agreement at this stage.

The decision illustrates how even carefully prepared arbitration agreements can have unintended consequences if not carefully rolled out. Suppose that notice to 50,000 employees results in just 1,000 opt-in plaintiffs, and all of them have signed enforceable arbitration agreements with a collective action waiver. While those employees ultimately may not be able to participate in the collective action for which they received notice, they nonetheless have now been in touch with a lawyer or group of lawyers who can file individual arbitration demands on behalf of all 1,000 employees who had filed consents to join the lawsuit for which they received a collective action notice after conditional certification.

And it gets worse. Consider that most third-party arbitration services require that the employer pay an initial fee when the employee’s claim is filed. The American Arbitration Association, for example, imposes a non-refundable fee of at least $1,500 on the employer for cases filed by an employee. Continuing with the example from above, the employer could be hit with $1,500,000 in costs just as the price to play. Costs begin to rise exponentially when it comes time to mount a defense and arbitrator and hearing fees begin.

In other words, employers should not expect that a Supreme Court endorsement of arbitration agreements with class and collective action waivers will act as a complete bar to collective claims. After all, to adopt a famous movie phrase, plaintiffs’ lawyers “find a way.” The Taylor decision shows the potential power of finding the “unicorn” plaintiff who is not bound by the same agreement as her co-workers, and shows that employers will have to ensure that each and every one of their employees will have to be bound by an arbitration program to maximize a class waiver’s protection. But even then, the unicorn for a plaintiff’s lawyer may merely be someone who had been employed by the defendant-employer within the last three years (the longest of the FLSA’s potential limitations periods), but whose employment had ended before the arbitration program had been enacted. Other novel workarounds are sure to arise if new rules about arbitration force plaintiffs to get more creative.

Co-authored by Kristen Peters and Simon L. Yang

Seyfarth Synopsis: Last month in Mendoza v. Nordstrom, Inc., the California Supreme Court addressed three questions about California’s “day of rest” statutes that prohibit employers from causing employees “to work more than six days in seven.” California employers can now rest assured that (1) employees are entitled to one day of rest during each workweek, not one day of rest in every rolling seven days; (2) an exception permits employers to require work each day of a workweek if every daily shift in that workweek is no more than six hours; and (3) while employers cannot require employees to forgo a day of rest, employees remain free to choose to work all seven days in a workweek.

California’s “Day of Rest” Provisions

In the beginning (or 80 years ago), the California legislature created the Labor Code. Sections 551 and 552 codified 19th century laws—the “day of rest” provisions—that entitle all in employment to “one day’s rest therefrom in seven” and prohibit an employer to “cause his employees to work more than six days in seven.” Later, the lawmakers said, let there be a six-hour exception, and Section 556 made the day of rest provisions inapplicable “when the total hours of employment do not exceed 30 hours in any week or six hours in any day thereof.”

The Alleged Violations in Mendoza

Two former Nordstrom employees, Chris Mendoza and Megan Gordon, occasionally were asked to fill in for other employees. As a result, they sometimes worked more than six consecutive days. During those weeks, some of their shifts were six hours or less.

Though the day of rest provisions historically lacked a private right of action, Mendoza and Gordon—enabled by California’s private attorneys general statute—sued in federal district court for alleged violations of Sections 551 and 552.

The district court initially rejected the former barista and sales associates’ claims—both because they were not required to work the fill-in shifts and because they had worked some less than six hour shifts during the at-issue weeks. The plaintiffs appealed.

Interpreting the Day of Rest Provisions

Uncertain how California courts would interpret the statutes, the Ninth Circuit asked for the California Supreme Court’s assistance. The Justices addressed and resolved three questions:

  1. Is the “day of rest” calculated by the seven-day workweek, or does it apply on a rolling basis to any seven-consecutive-day period?

A day of rest is guaranteed for each seven-day, employer-established workweek, not for any “rolling” seven-day period.

In reaching this result, the Mendoza court concluded that “the Legislature intended to ensure employees … a day of rest each week, not to prevent them from ever working more than six consecutive days at any one time.” Thus, periods of more than six consecutive days of work that stretch across more than one workweek are not per se prohibited.

Of more general interest, in adopting the workweek as the framework for counting the seven days the California Supreme Court made an observation that could be welcome to employers in future cases by indicating that this interpretation would be the one most congenial to an employer’s administration of time records.

  1. Does the Section 556 exception apply so long as an employee works six hours or less on at least one day of the applicable workweek, or does it apply only when an employee works no more than six hours on each and every day of the workweek?

The “six hour” exception applies only when an employee works no more than 30 hours in the workweek and no more than six hours on each day of the workweek.

  1. What does it mean for an employer to “cause” an employee to go without a day of rest?

“[A]n employer’s obligation is to apprise employees of their entitlement to a day of rest and thereafter to maintain absolute neutrality as to the exercise of that right.” The Court explained that an employer is not liable simply because an employee chooses to work a seventh day; rather, an employer “causes” an employee to go without a day of rest when it induces the employee to forgo an entitled day of rest. In other words, employers cannot coerce employees to forgo a day of rest, but they will not face liability if an employee, who is aware of the rest-day requirements, nonetheless chooses to work seven days in a row.

Again, employers likely appreciate the Justices’ rejection of the plaintiffs’ ambitious argument that the Labor Code should always be interpreted in such a way as to maximize liability. The Court recognized that an expansive interpretation is improper when the legislative intent indicates a narrower reading of the statute.

Moreover, the decision does protect employees and their right to choose. So on the seventh day, let them rest—or work. It’s up to them.

Lessons Learned for Employers 

Employers nonetheless should review their scheduling practices to assess whether employees (exempt and non-exempt) work all seven days in any employer-defined workweek. Employers should also ensure that their employment policies notify employees of their right to a “day of rest” so they can establish that an employee made an informed decision to forgo a day of rest. Finally, employers should consider obtaining a written waiver from an employee before agreeing to allow the employee to forgo a day of rest in a given workweek.

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.

Supreme-Court-seaslCo-authored by Kara Goodwin and Noah Finkel

Pending before the United States Supreme Court is a petition for writ of certiorari asking the Court to determine whether an employer may use payments for bona fide meal periods as an offset/credit against compensable work time. If the Supreme Court accepts the case, it would also provide an excellent opportunity for the Court to address repeat questions regarding the level of deference owed to statutory interpretations by agencies advanced for the first time in litigation and whether pay practices not expressly prohibited by the FLSA are permissible.

Case Background and Circuit Split

In Smiley v. E.I. DuPont De Nemours & Company, the plaintiffs filed an FLSA collective action seeking compensation for unpaid time spent donning and doffing uniforms and safety gear and performing other activities before and after shifts. This unpaid time averaged approximately 30 to 60 minutes per day. The plaintiffs worked 12-hour shifts and were paid for three 30-minute breaks per shift. The company counted the paid break time as hours worked for overtime purposes, even though the FLSA did not require it to do so, and included the payments in the calculation of the employees’ regular rate of pay. The paid break time always exceeded the amount of unpaid pre-shift and post-shift off-the-clock work (i.e., it was undisputed that the plaintiffs were paid for more hours than they actually worked—the employees had a total of 11 to 11.5 hours worked per day, including pre- and post-shift activities and excluding the paid break time, and were paid for 12 hours worked per day). The district court held that the employer could “completely offset the plaintiffs’ unpaid donning and doffing and shift relief activities with plaintiffs’ paid meal periods,” and granted summary judgment for the employer.

On appeal, the Third Circuit rejected the offset argument and overturned the dismissal. Giving deference to an amicus curiae brief submitted by the DOL, the Third Circuit held that the company’s pay practice violated the FLSA because “[n]othing in the FLSA authorizes the type of offsetting [the company] advances here.”  Although acknowledging that the FLSA is silent and does not “expressly prohibit offsetting,” the Third Circuit nonetheless determined that the company’s pay practice was contrary to the goals and broad remedial purpose of the FLSA.

The Third Circuit’s decision conflicts with decisions by the Seventh Circuit Barefield v. Village of Winnetka and the Eleventh Circuit in Avery v. City of Talladega, which both upheld the use of compensation paid for non-work time as a credit against overtime compensation owed for pre- and post-shift work time. More specifically, in Barefield, the employer required its employees to attend a 15-minute roll call before the scheduled start of their shifts but also paid employees for a 30-minute bona fide meal break each day. The Seventh Circuit held that “the meal periods are not compensable [hours worked] under the FLSA and [defendant] may properly offset the meal break against the compensable roll call time worked by plaintiffs.”

Similarly, in Avery, the Eleventh Circuit held that an offset/credit is appropriate when an employer pays for bona fide meal breaks under the FLSA: “If the meal break is not compensable time under the FLSA, then the [employer] should be allowed to offset the amount it pays for the meal break against any amount it owes the plaintiffs for pre- and post-shift time at work.” Thus, under the current state of the law, an employer who compensates employees for bona fide meal breaks (even though the FLSA does not require it) may properly offset that meal break against alleged off-the-clock work for an employee who works in Illinois or Florida, but the same pay practice, if used for an employee in New Jersey, would violate the FLSA. The Supreme Court has been asked to resolve this Circuit split to “restore uniformity to this important area of federal law.”

Other Important Questions To Be Resolved

The Supreme Court also has an opportunity to resolve an important question (and one causing division among courts of appeals and federal district courts) regarding the level of deference owed to statutory interpretations by agencies advanced for the first time in litigation, such as in amicus briefs. Here, the DOL’s amicus curiae briefs were its first statement on the offset pay practice at issue—the DOL has never promulgated a regulation prohibiting the use of compensation for non-work time included in the regular rate as an offset/credit; has not issued any opinion letters, published statements of policy, or guidance on this subject; has not taken any enforcement actions with respect to this issue; and before this case, has never submitted an amicus curiae brief on this issue. Nonetheless, and even though it did not find the statute at issue to be ambiguous, the Third Circuit accorded Skidmore deference to the DOL’s position that the employer’s pay practices ran afoul of the FLSA. Although the Supreme Court recently has criticized attempts by the DOL to offer guidance or positions not subject to notice and comment rulemaking or that reverse long-standing practice, the Supreme Court has not squarely addressed whether Skidmore deference is owed to an agency’s statutory interpretation expressed for the first time in litigation. The answer to this question is especially important given that amicus positions can flip-flop quickly with a change in administration and, as another appellate court has noted, “[t]he Secretary of Labor has been particularly aggressive in attempt[ing] to mold statutory interpretation and establish policy by filing ‘friend of the court’ briefs in private litigation.”

Finally, if the Supreme Court accepts this case, it would provide an opportunity to confirm that only practices Congress has prohibited in the FLSA can constitute violations of that Act. Put another way, if there is no express prohibition of a practice in the FLSA (i.e., the FLSA is silent concerning whether compensation paid for breaks that is included in the regular rate may be used as an offset/credit against compensable work time), the practice is permissible.

Co-authored by Christopher M. Cascino and Jennifer A. Riley

Seyfarth Synopsis: A federal district court last week decertified and effectively grounded a collective action of O’Hare Airport janitorial staff who claimed that their employer forced them to work off-the-clock without compensation. This decision, Solsol v. Scrub, Inc., stands out as a significant victory for employers because, even though all of the workers who joined the suit worked in one location and alleged off-the-clock work, the Court found their circumstances not similar enough to proceed to trial on a representative basis.

Case Background

Since at least October 2010, Scrub provided janitorial services at O’Hare airport. It did so pursuant to three types of contracts: (1) a contract with the City of Chicago to clean the domestic terminals; (2) contracts with airlines to clean gates; and (3) contracts with airlines to clean airplanes.

Plaintiffs, who worked for Scrub as janitors at O’Hare, sued Scrub, claiming that Scrub violated the FLSA in several ways. First, Plaintiffs claimed that Scrub only paid them for their scheduled, rather than actual, working hours. Second, Plaintiffs alleged that Scrub rounded their time in a way that undercompensated them. Third, Plaintiffs claimed that Scrub automatically deducted 30 minutes for meal breaks even when Plaintiffs worked during their breaks.

Plaintiffs alleged that Scrub did this to all its employees at O’Hare Airport, and the Court conditionally certified a collective action of Scrub employees who worked as janitorial staff at that airport. After discovery was complete, Scrub moved to decertify the collective action.

The Decision

In deciding that Plaintiffs’ collective action would not fly, the Court considered three factors. First, it considered whether the Plaintiffs and opt-ins had similar factual and employment settings. It found that, even though all opt-ins worked at O’Hare, it was at least questionable that all opt-ins worked in the same location given the size of O’Hare. The Court found that the opt-ins worked on different shifts for more than 40 different supervisors, weighing in favor of decertification.

The Court found that the claims of the opt-ins varied. Some claimed they were required to start work 15 minutes before their scheduled shift time every day; others claimed they worked only a few minutes before the start of their shift; still others claimed they did not work prior to the start of their shift. Some claimed their lunch breaks were interrupted for work about once per week; others claimed their lunch breaks were interrupted every day; others claimed they never took a lunch break; and others claimed they took full lunch breaks every day. Finally, the Court found that each supervisor had his or her own rounding policy. Given this, the Court found that Plaintiffs and the opt-ins had different factual and employment settings.

Second, the Court considered whether Scrub had individualized affirmative defenses. It found that Scrub could claim that it overpaid some opt-ins and that the unpaid time for some opt-ins was so minimal that it did not support a claim.

Third, the Court considered whether allowing the opt-ins’ claims to be decided in one proceeding would be fair. The court found that the only way to determine the number of hours that each opt-in worked without pay would be through individualized inquiries. Whereas Plaintiffs argued that the Court could determine the amount of off-the-clock work by comparing each employees’ time card with the time for which they were compensated, the Court found that this was, by necessity, individualized.

Finally, the Court found that the claims of the opt-ins could not be decided on the basis of “representative” testimony, especially in light of their different factual and employment settings. The Court, therefore, concluded that the collective action was not clear for trial and decertified the case.

Implications For Employers

The Court’s decision in Solsol provides a practical illustration of the fate that awaits many conditionally certified off-the-clock cases. Whereas employers facing conditionally certified collective actions have cause for concern, employers should remember that the standard at conditional certification is low and that plaintiffs often have a difficult time meeting the standard at decertification and showing that the claims of all opt-ins can be decided in one trial. This case provides a practical illustration of the shifting leverage that begins shortly after decertification as discovery shows that opt-ins assert different claims for different alleged violations at the hands of different supervisors.