By: Shannon Cherney and Lennon Haas

Seyfarth Synopsis: The Ninth Circuit’s decision in Harrington v. Cracker Barrel underscores the growing importance of personal jurisdiction in limiting the scope of FLSA collective actions.  The court held that employees with no connection to the forum state may not be able to join a lawsuit filed there, even if they share similar claims.  This ruling offers employers a strategic tool to challenge nationwide wage and hour claims and contain litigation risk in multi-state operations.

When a group of employees sues a large company like Cracker Barrel, one of the first questions the court has to answer is not about wages or hours—it’s about where the lawsuit is happening and who the court has power over.  This issue – personal jurisdiction – played a key role in the Ninth Circuit’s recent decision, Harrington v. Cracker Barrel.

Personal jurisdiction determines whether a court has the authority to make decisions about a particular person or company.

There are two types of personal jurisdiction:

  1. General jurisdiction: A court has broad authority over a person or business that is “at home” in the state. For corporate defendants like Cracker Barrel, that typically means the state in which the defendant is incorporated or has its principal place of business.
  2. Specific jurisdiction:  A court can hear a case if the events in the lawsuit are sufficiently connected to that state.

If a court does not have personal jurisdiction, it cannot hear the case—even if everything else about the lawsuit is valid.

In this case, a Cracker Barrel employee in Arizona sued the company, claiming it violated the federal Fair Labor Standards Act by underpaying tipped workers.  She wanted to send notices to other employees across the country so they could join the lawsuit and become part of an FLSA collective.  Many of those employees, however, didn’t work for Cracker Barrel in Arizona, didn’t live in Arizona, and had no connection to Arizona at all.  

The district court preliminarily certified a collective, which allowed the case to move forward in the aggregate.  In so doing, it approved sending notices to other potential plaintiffs across the country—even those with no apparent connection to Arizona.

The Ninth Circuit granted Cracker Barrel’s petition for an interlocutory appeal of this issue, along with two other issues unrelated to the personal jurisdiction question.  Cracker Barrel claimed that the district court should not have allowed nationwide notice without first checking whether it had personal jurisdiction over each potential plaintiff’s claim.  

The Ninth Circuit agreed in part.  It held that before a court can authorize nationwide notice in an FLSA collective action, it must first consider whether it has specific personal jurisdiction over each potential plaintiff’s claim.  Cracker Barrel is incorporated and has its principal place of business in Tennessee, so it was undisputed that Cracker Barrel was not subject to general personal jurisdiction in Arizona.

The Ninth Circuit joined the Third, Sixth, Seventh, and Eighth Circuits in holding that the Supreme Court’s decision in Bristol-Myers Squibb applies in FLSA collective actions in federal court.  The Supreme Court in Bristol-Myers Squibb held that the due process clause of the Fourteenth Amendment prohibited a California state court from exercising specific personal jurisdiction over the mass tort claims of the nonresident plaintiffs against the nonresident defendant.  It emphasized that courts cannot hear claims from out-of-state plaintiffs unless there is a meaningful connection between the forum state and the claims.  The applicability of the Bristol-Myers Squibb decision to Harrington’s FLSA collective action means if someone worked for Cracker Barrel in, say, Georgia, and has no connection to Arizona, they might not be able to join the Arizona lawsuit.

The district court mistakenly assumed that participation of a single plaintiff with a claim arising out of Cracker Barrel’s business in Arizona was sufficient to establish personal jurisdiction over Cracker Barrel for all claims in the collective action.  Because the district court abused its discretion by authorizing nationwide notice on this basis, the Ninth Circuit vacated the district court’s authorization and remanded for further proceedings.

This decision is a positive development for employers, particularly those with operations in multiple states.  It reinforces the importance of monitoring where lawsuits are filed and who is being included.  The court’s emphasis on personal jurisdiction in the context of FLSA collective actions has meaningful implications for litigation strategy and risk management:

  • Early Challenges to Collective Scope Are Now More Viable.  Employers may have stronger grounds to challenge the inclusion of out-of-state employees in FLSA collective actions filed in a single state.  If a court lacks personal jurisdiction over claims brought by employees with no connection to the forum state, those claims may be excluded from the case.
  • Forum Shopping by Plaintiffs May Be Curtailed.  The decision reinforces limits on plaintiffs’ ability to file in jurisdictions perceived as favorable while attempting to include employees from across the country.  Courts are now more likely to scrutinize whether the forum has a sufficient connection to each claim.
  • Nationwide Notice Is No Longer Assumed.  The ruling makes clear that courts should conduct a jurisdictional analysis before authorizing nationwide notice in FLSA cases.  This could reduce the number of employees who receive notice and ultimately join the action.

The legal landscape around collective actions and jurisdiction is evolving quickly.  Those with questions about the effects of this decision should feel free to contact a member of Seyfarth Shaw LLP’s wage and hour team.  

Seyfarth Synopsis: The freshly enacted “One Big Beautiful Bill” introduces two above-the-line tax deductions for tips and overtime wages. While these deductions offer potential savings for eligible workers, they come with new compliance obligations and nuanced legal considerations that employers will need to navigate carefully.

With Sharpie in hand and military jets overhead, President Trump marked Independence Day by signing H.R. 1, best known as the “One Big Beautiful Bill,” or “OBBB”—into law. Among the bill’s myriad provisions are two long-promised pledges: no tax on tips, and no tax on overtime.

Starting with the 2025 tax year, OBBB will allow workers below certain income thresholds to deduct up to $12,500 in “qualified overtime compensation” ($25,000 for on a joint return), and $25,000 in “qualified tips.” To emphasize the benefit for impacted workers, the White House has launched a calculator on its OBBB website, which calculates estimated tax savings based on user inputs for weekly base wages, tips, and overtime.

Of course, these provisions’ full impact lies in the details. The OBBB reflects nuance about which workers are eligible for deductions, and what amounts they may deduct. For employers, the new law may require updated wage tracking and reporting capabilities, and it could cause a shift in an already shaky wage-hour litigation landscape.

No Tax on Qualified Tips

For 2025 tax returns, the OBBB will allow an above-the-line deduction of up to $25,000 in “qualified tips” for workers in “traditionally tipped occupations.” The deduction is available in full for workers with adjusted gross income (“AGI”) under $150,000 ($300,000 for a joint return), and phases out by $100 for every $1,000 over the AGI threshold.

So who qualifies as “traditionally tipped”? Per the OBBB, the Treasury Secretary has until October 2, 2025 (90 days post-enactment) to publish an official list. The statute clarifies that roles not “customarily and regularly tipped” as of the end of 2024 are excluded. In other words, this isn’t an opening to recast untipped roles as tipped to seize a deduction.

As for “qualified tips,” they must be voluntary, customer-determined, and non-negotiated. And of course the tips must be reported. Tips earned through a tip-sharing arrangement count, but service charges and other mandatory fees do not.

FICA and income tax withholding still apply. Employers must continue reporting tips as before.

Moreover, employers  will now be required to track and report “qualified” tips for W-2 reporting. For the 2025 tax year, employers may rely on a “reasonable method” approved by the Treasury Secretary for estimating qualified tips, but exact reporting will be required starting in 2026.

No Tax on Qualified Overtime

The OBBB allows a deduction of up to $12,500 in “qualified overtime compensation” ($25,000 for a joint return), with the same AGI thresholds and phase-out as the tipped wage deduction.

Critically, this only applies to overtime pay required by the FLSA, and only the premium portion above the “regular rate.” For an oversimplified example, an employee who earns nothing more than a base rate of $10/hour and $15/hour for each overtime hour could only deduct the $5/hour overtime premium (subject to the income limits noted above).

As written, it appears that overtime premiums paid pursuant to state law (e.g., daily overtime in Alaska, California, Colorado, or Nevada), a collective bargaining agreement, or employer policy would not qualify for deduction. The deduction is reserved for overtime premiums as defined by the FLSA.

As with tips, employers will need to record and report qualified overtime compensation on the Form W-2. To do this, they must be able to isolate overtime premiums required by the FLSA. For 2025, similar to reporting for tips, the OBBB permits reporting “approximate” qualified overtime compensation pursuant to a “reasonable method” specified by the Treasury Secretary.

What it Means for Employers

While these tax benefits apply to employees, some administrative burden falls on employers. With these changes taking effect for the 2025 tax season, preparation should begin now. Employers should consider the following action items:

  • Review payroll and reporting systems. Employers will need to consider whether system changes are needed to comply with new Form W-2 reporting rules and support employees in calculating their deductions. Systems will need to be able to distinguish qualified tips as well as qualified overtime compensation.
  • Assess exempt job classifications. It’ll be more important than ever to ensure confidence when classifying a job as exempt from overtime. Employees classified as exempt may may be more likely to challenge that status when the financial benefits of overtime compensation increase through this deduction.
  • Educate employees. In some scenarios, employers may need to manage their employees’ expectations. For example, it may warrant emphasizing that these changes present tax deductions, not raises, and workers won’t see the benefit until they file their 2025 tax returns in 2026.
  • Assess tipping protocols and practices. Mandatory charges like automatic service charges don’t qualify for deduction, nor do unreported tips. Employers may need to reinforce tip-reporting protocols and educate employees on tipped wage practices. Given the publicity around these changes, employers may also need to consider how they will field customer questions about tipping practices, service charges, and the like. 
  • Monitor regulatory guidance. We will see Treasury guidance on, at a minimum, qualifying tipped occupations and acceptable reporting methods. This is important to watch.

The Bigger Picture

Beyond tax season, the OBBB may have broader impacts for employers.

These changes may make tipped roles more attractive. The same is true for overtime shifts. In some industries, this could impact talent recruiting and retention. Employers may also need to evaluate staffing and compensation models as they are pushed to emphasize tipped and overtime wages.

Increasing the value of tips and overtime earnings could also impact employment litigation. At least in theory, employees should be more cognizant than ever of the tipped and overtime wages they bring home. They may, as a result, be more likely to pursue litigation concerning the same. And in settlements of employment litigation, plaintiffs’ attorneys may focus more intently on how back wages are allocated, impacting how agreements are structured and payments reported.

While these deductions are hardly the only newsworthy items to extract from the OBBB, they are important and will require careful consideration and planning.

Seyfarth Synopsis: The DOL’s Wage and Hour Division just scrapped its policy of seeking liquidated damages (double damages) in FLSA investigations. Why? Because it probably didn’t have the statutory authority in the first place, and doing so slowed down resolutions. Going forward WHD investigators are no longer allowed to demand liquidated damages in administrative settlements.

The U.S. DOL‘s Wage and Hour Division is the administrative division responsible for enforcing the FLSA’s minimum wage, overtime pay, and child labor provisions. The Division employs just over 600 investigators—about 25% less than a few years ago—to oversee and enforce the compliance of more than 6.2 million U.S. employers. By the numbers alone, the investigators have their work cut out for them.

Of course, doing more with less has been a well-known focus of the Trump Administration. That focus is shared—whether out of philosophy, necessity, or both—at WHD. Less than six months into the new term, the Division’s leadership has placed a greater emphasis on proactive education—ensuring that employers and employees understand their legal obligations and rights—and efficiency.

Take, for example, the DOL’s re-launch of its opinion letter program. This initiative provides an avenue for WHD to proactively address sometimes murky questions of how the FLSA applies in specific scenarios. In addition to providing clear answers for those who request an opinion letter, the process allows the Division to provide guidance to the broader regulated community.

But with just 600-ish investigators and an anticipated reduction in its discretionary spending budget, the question remains: How might the Division do more with less? WHD provided another answer to this question late last month.

On June 27, 2025, the Division issued Field Assistance Bulletin (FAB) No. 2025-3, marking a significant policy shift in its enforcement of the FLSA. WHD investigators are no longer authorized to seek liquidated damages during pre-litigation administrative investigations or resolutions.

This is a big deal. Recall that, in private litigation, liquidated damages (i.e., damages equal to any back wages owed) are presumed to be owed unless the employer proves to the court that the underlying FLSA violation was committed despite the employer’s good faith efforts to comply with the law. (You may be thinking (like we are) that WHD’s prior authority—now undone—to impose liquidated damages in an investigation looks like a presupposed conclusion that an employer did not act in good faith—and with no judge to consider evidence of that employer’s good faith.)

To some who deal with these issues every day, liquidated damages should never have been appropriate in WHD investigations. Aside from seeming to be a consequence of WHD usurping a determination typically reserved for a judge, they could have been perceived by the skeptics to be a punitive and sometimes political tool rather than a device meant to make employees whole and guide an employer toward compliance. So this development is somewhat of a corrective measure, so to speak.

But back to efficiency. Aside from being right under the law, FAB No. 2025-3 will streamline the resolution of FLSA claims determined as the result of a WHD investigation.

So What Happened?

FAB 2025-3 takes the place of prior bulletins that authorized WHD investigators to levy liquidated damages (including FABs 2020-2 and 2021-2). It reaffirms that the WHD’s relevant authority is limited to supervising the payment of unpaid minimum wages and overtime compensation—not to imposing liquidated damages.

This view stems from Section 16(c) of the FLSA, which empowers the Secretary of Labor to take enforcement action against employers under the Act and to supervise the payment of back wages. It’s the source for WHD’s power to investigate compliance. That’s different from  Section 16(b), which provides the private right of action for an employee to file an individual or collective action brought on behalf of herself and others similarly situated to recover back wages and liquidated damages.

Based on the statute itself, liquidated damages are only available through judicial enforcement under Section 16(b) or through settlement of pending litigation.

That’s the Law, Now What About Efficiency?

Beyond legal (and, fine, nerdy) underpinnings, the FAB reflects WHD’s observation that seeking liquidated damages during administrative settlements delayed case resolutions by an average of 28%. Presumably that delay came from employers and their advisors rightly pushing back, and WHD investigators having to respond.

So, to eliminate that waste, WHD’s goal for FAB 2025-3 is to:

  • Accelerate recovery of wages for affected employees;
  • Reduce friction in settlement negotiations; and
  • Allow more efficient use of WHD enforcement resources.

What Does This Mean in the Short-Term and the Long-Term?

If you’re an employer who agreed to pay liquidated damages as the result of a WHD investigation, and you finalized the agreement to do so before June 27, 2025, there’s probably not much you can do to get out of the agreement. The FAB is not retroactive.

If you’re in the midst of an investigation in which violations resulting in back wages may be found, you should not be asked to pay liquidated damages—and if you are, you should be ready to push back. While no investigator should try to slip that one by in light of the FAB, the DOL is a big place and WHD investigators are busy people—sometimes it takes a while for those in the field to learn about changes made in Washington, D.C.

Longer term, it’s worth doing a little tea-leaf reading. With so few investigators relative to the number of employers comprising our thriving U.S. industries, we expect WHD to continue to focus on initiatives meant to educate and guide employers to comply with the law. It simply won’t be feasible for the Division to enforce the law predominantly through investigations. Does this mean a return of the so-called PAID Program (Payroll Audit Independent Determination program), or other initiatives like it? Time will tell.

Of course, this does not mean that employers should disregard their obligations to pay employees lawfully. Indeed, it’s quite possible that, as WHD investigations diminish in number, the plaintiffs’ wage and hour bar will intensify their efforts to file suit across the states. It’s also possible that we will see increased enforcement activity at the local and state level (if you’re in California, think DLSE).

Instead of looking at this as some sort of lessening of WHD’s power, we encourage employers to consider whether the Division’s focus on education, guidance, and efficiency might open a door to permit a more conciliatory and collaborative approach in how employers interact with WHD. Consider whether it might be worthwhile to request an opinion letter regarding nuanced practices, where the law might not be so clear. And consider negotiating a resolution—without liquidated damages—if you happen to face a WHD investigation. After all, employees who receive back wage payments under WHD supervision (under Section 16(b)) can typically structure the process to achieve a release of claims that could have instead been pursued in litigation (under Section 16(c)). And if we’re right that private litigation will increase as WHD investigations diminish, closure through WHD could be a great thing to have.

Conclusion

FAB 2025-3 reflects a recalibration of WHD enforcement authority. By narrowing administrative settlements to actual back wages, the WHD is aligning more closely with its statutory limits while also seeking more efficient resolutions.

This change limits WHD to what the law actually allows, and it creates a path for faster, more predictable resolutions. Employers should stay compliant, stay alert, and consider whether WHD’s shift opens new doors for proactive engagement.

Seyfarth Synopsis: In a welcome development for employers navigating complex federal employment laws, the U.S. Department of Labor has announced the re-launch of its opinion letter program across several agencies, including the Wage and Hour Division (WHD). The move may also reflect a broader shift in how the DOL will leverage its potentially reduced resources—aiming to maximize impact through a collaborative, guidance-driven approach.

Ever wish you could ask the Department of Labor: “What if we do this?” Good news: you can again.

On June 2, 2025, the DOL announced the return of its opinion letter program. The move equips compliance-minded employers with a potentially useful tool for navigating gray areas under federal employment laws enforced by the DOL. But like most things in this space, this development comes with important nuances that demand caution and understanding.

Old Creature, New Life

Opinion letters—which are official, written responses to fact-specific legal inquiries—have long served as a tool for interpreting federal employment laws in real-world contexts.

Though not new, their usage has ebbed and flowed with political tides. By way of example, WHD issued over 70 opinion letters concerning the federal Fair Labor Standards Act during the first Trump Administration. By contrast, the Biden Administration published just three FLSA opinion letters, all within President Biden’s last two full months in office.

The DOL’s announcement signals an emphasis on proactive compliance support. As the Department’s Deputy Secretary, Keith Sonderling, explained, the DOL views letters as “an important tool in ensuring workers and businesses alike have access to clear, practical guidance.” To effect this impact, the DOL will publish letters not just at WHD, but also four other agencies, including:

  • VETS (which, like WHD, will issue opinion letters);
  • OSHA (which will provide letters of interpretation);
  • EBSA (which will release advisory opinions and information letters); and
  • The Mine Safety and Health Administration (MSHA) will provide compliance assistance resources through its new “MSHA Information Hub,” which the DOL describes as “a centralized platform offering guidance, regulatory updates, training materials and technical support.”

Our focus here is opinion letters issued by WHD.

A Scalable Tool in a Potentially Leaner Framework

The DOL’s move provides an avenue to engage employers as partners in compliance—more carrot, less stick. It also may reflect a broader strategy of strategically leveraging relatively limited resources for broader impact.

Moving forward, it is fair to expect the DOL to operate with more limited resources than past years. President Trump’s recently proposed budget would cut DOL discretionary spending from $13.3 billion to $8.6 billion and moving forward with reduced headcount relative to the prior year. According to some reports, WHD investigator staffing, in particular, is down 25% compared to 2022 (from 810 investigators as of November 2022, to 611 as of May 2025).

With these realities in mind, the Department likely views opinion letters as a scalable tool to help extend the agency’s reach. This approach echoes initiatives from the first Trump Administration. This includes not only prior opinion letter practice, but also initiatives like the Payroll Audit Independent Determination (PAID) program. Championed by the DOL’s now-Deputy Secretary, Keith Sonderling, during his stint at DOL during the first Trump Administration, PAID offered a path for employers and their representatives to self-report and proactively correct wage-hour compliance issues without rolling out a red carpet for litigation.

What Opinion Letters Can (and Can’t) Do

Opinion letters can reduce legal uncertainty and bolster compliance confidence. But they of course lack the force of a statute or regulation and have some other limitations as well.

When a requester presents a complete and accurate fact pattern, the agency responds with an interpretation of how the law applies. Not only does the interpretation resolve the open question, but, at least in the wage-hour context, the employer’s reliance on the letter can shield them from liability under the FLSA.

Of course, opinion letters are not silver bullets—their utility comes with caveats:

  • Limited scope: Letters offer a surefire defense only for the requester and the specific facts presented.
  • Binding effect: An unfavorable opinion is just as binding as a favorable one.  
  • Judicial deference: While binding only for the involved parties, opinion letters offer guidance to all members of the regulated community. In the litigation context, courts typically weigh their value as potentially persuasive authority. (Of course, it remains to be seen whether courts will be even less likely to defer to administrative agencies following the Supreme Court’s 2024 decision in Loper Bright, which we wrote about earlier this year.)
  • No impact on state law: DOL interpretations generally don’t bind state or local agencies, nor do they dictate the interpretation of state and local laws.

Despite these limitations, opinion letters remain a valuable compliance tool—especially when used strategically and, in our view, in consultation with counsel.

Takeaways for Employers

The expanded opinion letter program is a promising development for compliance-minded employers. To make the most of this opportunity, we encourage employers to keep the following in mind.

  • This is a Positive Development: When leveraged effectively, opinion letters can offer both clarity and protection.
  • Be Strategic: Because letters are binding and fact-specific, we believe that employers should consult counsel to assess whether a request is appropriate and to ensure a sound understanding of the underlying laws, the relevant facts, and the opinion letter process.
  • Watch the Courts: While it is conceivable, post-Loper Bright, that courts will give less deference to agency interpretations, we expect that well-reasoned letters aligned with statutory text will remain persuasive.

The expanded the use of opinion letters is a promising development for the regulated community. They can be a powerful tool for navigating a complex regulatory environment, and they signal that the DOL remains committed to practical, front-line support for employers and employees alike.

If you have any questions about the opinion letter process or related matters, please contact the blog author or your favorite Seyfarth lawyer.

By: Phillip J. Ebsworth and Jeff A. Nordlander

Seyfarth Synopsis: The Second District Court of Appeal held that, under the pre-reform PAGA statute, an individual employee need not have been employed or experienced a Labor Code violation during the one-year PAGA limitations period to have standing to assert a PAGA claim.

In Osuna, the plaintiff submitted a PAGA notice to the Labor Workforce and Development Agency more than one year after the conclusion of his employment. Because the plaintiff was not employed during the PAGA period, he could not have experienced any Labor Code violations during the one-year PAGA limitations periods. The trial court sustained the employer’s demurrer to the employee’s PAGA claim, reasoning that it was untimely under the one-year limitations period applicable to actions to recover statutory penalties in Code of Civil Procedure section 340(a).

The Second District reversed, holding that the trial court had improperly grafted the statute of limitations onto PAGA’s standing requirements, which the Second District found to be distinct. According to the Second District, the only standing requirement PAGA imposes is that the plaintiff have been employed by the alleged violator and experienced one or more of the violations alleged in the Complaint. The Second District concluded there is no temporal component to these requirements and the fact that a PAGA’s plaintiff’s employment ceased years or even decades before they file suit is irrelevant. The Second District did not grapple with the difficult issues raised by its decision, such as how a Court is supposed to decide whether a PAGA plaintiff experienced a Labor Code violation that allegedly occurred decades prior to the filing of the lawsuit.

Fortunately for employers, the relevance of Osuna should be short-lived. The recent amendments to PAGA, which apply to all actions filed after June 19, 2024, expressly confirm that a PAGA plaintiff must have experienced a Labor Code violation within the one year prior to their submitting a PAGA notice to the LWDA. The reasoning of Osuna is also in tension with another recent Second District decision, Williams v. Alacrity Solutions Group, LLC, in which a different division of the Second District held that a PAGA claim must be brought within one year of the last Labor Code violation personally experienced by the named plaintiff to be viable. Pending a decision by the California Supreme Court resolving this dispute, employers can argue in trial courts that Williams is the better-reasoned decision and should be followed over Osuna.

By Phillip J. Ebsworth and Clara L. Rademacher

Seyfarth Synopsis: The First District held that a prevailing defendant in a PAGA action may not recover litigation costs from the California Labor Workforce Development Agency when the LWDA did not participate in the litigation.

In Rose v. Hobby Lobby Stores, Inc., a former employee at Hobby Lobby, filed a lawsuit under PAGA, alleging that her employer violated the “suitable seating” provisions of the applicable Industrial Welfare Commission Wage Order. After a nine-day bench trial, the court ruled in favor of Hobby Lobby. The trial court awarded nearly $125,000 in litigation costs to Hobby Lobby as the prevailing party under the general cost recovery rule set out in Code of Civil Procedure section 1032(b). The trial court concluded that the LWDA could be responsible for costs incurred by defendants who prevail on PAGA claims. The LWDA appealed, raising the issue of whether it could be held liable for litigation costs incurred by a prevailing defendant in a PAGA action.

The First District reversed the trial court’s order, concluding that even if a prevailing defendant in a PAGA action is entitled to recover its costs under the general cost recovery rule, those costs are not recoverable against the LWDA where it did not participate in the litigation. The court emphasized that the LWDA’s role as a real party in interest does not extend to liability for litigation costs incurred by a prevailing defendant. Accordingly, the awarded costs could only be recovered against the named-plaintiff.

By: Kelly J. Koelker and Michael E. Steinberg

The rules governing the employment relationship are always changing. Laws creating new employer obligations, technology solutions making work more efficient and more complicated, and rules governing the resolution of disputes between employers and their workers are around every corner. Wage and Hour Around the Corner is a new blog series for employers, in-house lawyers, and HR, payroll, and compensation, that helps employers stay on the cutting edge of wage and hour changes happening now and those on the horizon.

Seyfarth Synopsis: Following the US Supreme Court’s decision in Loper Bright announcing the end of Chevron deference, lower federal courts have begun to apply the decision to uphold some federal wage-hour rules while striking down others; state courts, meanwhile, have taken divergent approaches to agency deference in the wake of Loper Bright.

In June 2024, the Supreme Court overruled the Chevron doctrine of agency deference, under which federal courts deferred to agencies’ interpretations of ambiguous laws they administered so long as the agencies’ constructions were based on a “permissible” reading of the statute.  Under the Chevron regime, courts were to defer to agencies’ statutory interpretations even if they would have reached different conclusions as to what the statute meant.  In Loper Bright, the Supreme Court instructed that it is the task of the federal courts, not administrative agencies, to decide questions of law, including the proper construction of a statute.

Loper Bright produced immediate fallout in the world of federal wage and hour law.  As we have covered previously, the Department of Labor’s “80/20” rule governing performance of non-tip-producing work by tipped workers, promulgated in late 2021, was the subject of pending litigation when Loper Bright was decided.  A federal district court in Texas, applying Chevron deference, had upheld the validity of the rule. The Fifth Circuit, discarding the veneer of agency deference post-Loper Bright, reversed and vacated the 80/20 rule.

Nonetheless, Chevron—and Loper Bright’s overruling of Chevron—only comes into play where Congress has not explicitly delegated discretion to regulate to the relevant agency. As the Supreme Court stated in Loper Bright, “When the best reading of a statute is that it delegates discretionary authority to an agency, the role of the reviewing court” is to “fix[] the boundaries of the delegated authority” and ensure that the agency has engaged in rational decision-making within those limits. 

In a number of instances, the FLSA makes such express delegations of regulatory authority to the Secretary of Labor.  For example, under Section 213 of the FLSA, the Secretary has the express authority to “define[] and delimit[]” the statute’s minimum wage and overtime exemptions for bona fide executive, administrative, and professional employees (“EAP Exemption”).  Earlier this month, the Sixth Circuit reaffirmed the DOL’s “broad authority” to “define and delimit” the scope of the EAP Exemption, and rejected an employer’s attempt to invalidate the DOL’s longstanding requirement that employees be paid a DOL-established minimum salary to qualify for the exemption.  The Sixth Circuit’s decision came on the heels of a Fifth Circuit opinion reaching the same conclusion. 

In short, employers should not assume that Loper Bright will usher in a sea change—its practical effects on the validity of most of the DOL’s rulemaking and administrative guidance under the FLSA may prove to be more modest. That said, after Loper Bright, it remains to be seen which areas of FLSA rulemaking courts will find to be questions of statutory interpretation rather than review of delegated discretionary authority.  For example, in the litigation over the DOL’s 80/20 Rule, the Fifth Circuit found the inquiry turned on the proper interpretation of the statutory terms “engaged in” and “occupation,” terms the court found not to be ambiguous.

Meanwhile, employers facing state law wage-hour claims implicating state regulations also should consider whether and how Loper Bright might affect courts’ disposition of those claims.  That is because when courts decide state wage-hour claims that are analogous to claims under federal wage-hour law, they often look to federal precedent for guidance or even expressly adopt the federal standard. This means, in theory, that if a federal court strikes down a federal wage-hour regulation based on Loper Bright, then a court looking to federal law in deciding parallel state law claims likewise could be inclined to reach the same result.

But this outcome—parallel determinations when both federal and state law claims center on application of analogous federal and state regulations—is not a foregone conclusion. Loper Bright involved interpretation of the federal Administrative Procedure Act (APA), which applies only to promulgation of federal regulations and thus does not directly affect courts’ analysis of state law claims involving state-issued regulations. Many states have a “mini-APA” comparable to the federal APA pursuant to which state regulations may be promulgated.  If a state “mini-APA” tracks the federal APA, then courts examining state wage-hour regulations may be inclined to determine that Chevron deference likewise should not be granted to state rules after Loper Bright. But attention must be paid to the specific standard of review—independent of federal law—that states apply to guide courts reviewing state regulations.

Some states, including Georgia, Hawaii, Illinois, Massachusetts, and Texas, grant “substantial deference” to state agency interpretations of ambiguous state laws, sometimes expressly endorsing the Chevron approach. In these states, Chevron-like deference likely would still apply to state-issued regulations. Other states, including California, apply a somewhat lower, and sometimes variable, level of judicial deference when reviewing state regulations. Akin to Loper Bright, a growing number of state courts do not grant deference to state agencies in reviewing regulations interpreting state laws.

It remains to be seen whether courts or legislatures in the “substantial deference” states will amend their standard of review to align with Loper Bright, or will continue to call for Chevron-like analysis. At least one state supreme court (Hawaii) has expressly criticized the U.S. Supreme Court’s decision in Loper Bright and made clear that it will continue to defer to agency expertise in interpreting ambiguous state laws.  One the other hand, a concurring opinion in another state appellate court decision (Georgia) has questioned whether it should abandon Chevron-like deference and follow the Loper Bright approach.

Given the complexity of these issues and the relative recency of Loper Bright¸ it is not surprising that they have not yet been widely addressed in federal or state appellate decisions. When confronted with analogous wage-hour claims asserted under both federal and state law, employers should:

  • Analyze whether the claims turn on application of federal and state regulations.
  • Analyze whether Congress or a state legislature has delegated rule-making authority under the applicable statute(s) and relevant authority.
  • Consider whether defense of the claims would be advanced by challenging the applicable federal regulation under the standard announced in Loper Bright and the applicable state deference standard.
  • Bearing in mind that state law wage-hour claims often carry with them longer statutes of limitations and enhanced damages relative to federal law, be prepared to rebut plaintiffs’ arguments that the outcome under state law should not be affected by analysis of the applicable federal regulation under Loper Bright.

If you have any questions, please do not hesitate to reach out to the authors of this post, or the Seyfarth attorney with whom you work. In addition to being here to assist with those considerations, we will continue to monitor these important developments and keep our readers informed.

Seyfarth Synopsis: PAGA claims brought under pre-reform PAGA must be brought within one year of a Labor Code violation experienced by the plaintiff and because a PAGA claim necessarily has both an individual and a non-individual component, failure to do so warrants dismissal.

The Second District affirmed the Superior Court’s dismissal of a PAGA claim where the PAGA notice and lawsuit were both filed more than a year after the plaintiff’s employment with the defendant ended. In doing so, the Second District held that the statute of limitations for a PAGA claim is tied to Labor Code violations allegedly suffered by the named plaintiff (i.e., the “individual” component of the PAGA claim). Therefore, a PAGA claim must be brought within one year of the last Labor Code violation personally experienced by the named plaintiff to be viable. The Court distinguished the holding in Johnson v Maxim Healthcare Services, Inc. that a PAGA plaintiff does not have to suffer a Labor Code violation within the one year statute of limitations in order to proceed with a PAGA case. The Court of Appeal noted that Johnson’s holding was focused only on PAGA’s standing requirements to be a private attorney general – i.e. that an individual must be “aggrieved” and an “employee.” Even if a plaintiff may have standing to be a private attorney general, they still must meet the independent requirements of the statute of limitations. The Court of Appeal further held that PAGA’s purpose of addressing workplace violations “expeditiously” would not be met if an individual could file suit 30 years after a plaintiff left the defendant’s employ because the alleged violations would have continued for years without being remediated or deterred.

The Court’s holding is consistent with the 2024 reform to PAGA, which now specifically requires an “aggrieved employee” to have “personally suffered each of the violations alleged” within one year of filing. However, the Second District’s decision makes clear that the one-year statute of limitations applies to the individual component of PAGA claims for lawsuits filed before the Legislature’s 2024 amendment. The Court of Appeal’s decision is based partly on statutory language requiring that a PAGA action be brought “on behalf of [the PAGA plaintiff] and other current or former employees,” citing with approval Leeper’s reasoning that both an individual and nonindividual component are necessarily part of any PAGA claim. It is important to note that the California Supreme Court recently accepted review of the Leeper decision. While review is pending, however, parties are able to cite to Leeper. 

The decision provides additional ammunition to defend against plaintiff’s counsel’s new trend of filing “non-individual only” PAGA claims in an attempt to side step Viking River arbitrations of the individual component of PAGA claims. It also serves to increase importance of compelling the individual portion of a PAGA claim to arbitration so that a plaintiff is required to prove that they personally suffered a Labor Code violation within the statute of limitations before the representative component is litigated in Court.

The rules governing the employment relationship are always changing. Laws creating new employer obligations, technology solutions making work more efficient and more complicated, and rules governing the resolution of disputes between employers and their workers are around every corner. Wage and Hour Around the Corner is a new blog series for employers, in-house lawyers, and HR, payroll, and compensation, that helps employers stay on the cutting edge of wage and hour changes happening now and those on the horizon.

Seyfarth Synopsis: The COVID-19 pandemic necessitated a temporary reimagining of workplace dynamics, compelling companies to adapt to new modes of operation. As global conditions have stabilized, businesses now face the task of determining their enduring work model. Whether your organization advocates for remote work, embraces a hybrid approach, or reverts to a conventional office environment, the considerations extend beyond mere logistics. Achieving the optimal balance demands a deliberate integration of legal frameworks, employee engagement, and operational strategies. The journey to finding the right balance requires a thoughtful integration of legal considerations, employee relations, and operational strategies. It involves crafting clear communication channels, establishing robust policies, and engaging in proactive planning. These elements are essential for harmonizing flexibility with legal compliance, achieving cost efficiencies, and nurturing employee morale. In the following discussion, we explore the dynamic landscape of modern workspaces five years post-pandemic and reveal the secrets to thriving in this new era of work.

The COVID-19 pandemic forced a global experiment in remote work, introducing many positions to a work-from-home model for the first time. For some employers, remote work has become a permanent fixture, offering numerous advantages: cost savings on decreased office space, a reduced carbon footprint from less commuting, and enhanced employee productivity and happiness, leading to better work-life balance.

Yet, remote work isn’t a one-size-fits-all solution. Many employers have found that fully or partially remote work presents unique challenges, including diminished in-person communication and collaboration, which can impact morale and productivity.

Whether your business thrives on remote work or continues to face hurdles, there’s no definitive right or wrong approach. Below are some legal considerations to keep in mind.

A. Navigating Contract Claims – “You Promised Me Remote Work.”

As an employer, you might be facing a situation where an employee claims they were promised remote work—either in writing (via an employment contract, offer letter, or another explicit written document) or verbally—and relied on this alleged promise, to their detriment. No law broadly prohibits requiring employees to return to a specific work location or come into the office after a period of remote work, but such contract and quasi-contract claims can be complex because they require an individualized, employee-by-employee assessment.

To begin with, it’s essential to take a thorough look at your employment contracts, email exchanges, and explore any discussions managers and human resources may have had with staff regarding remote work. This analysis is highly fact-specific and varies by employer and each employee. There may be explicit language in your documents that clearly refutes a claim that the company promised employees the permanent ability to work remotely, which can help guide your decision-making. And, generally, at-will employment means employers can dictate the terms of employment, including work location, at its discretion. But that general rule only goes so far.  

For example, if your company agreed to remote work in writing but explicitly reserved the right to require employees to return to the office at any point, then confirm whether there is a notice provision that mandates giving employees advanced notice prior to requiring them returning to work. Even if such a provision doesn’t exist, it’s worth considering from an employee-relations perspective. Employees (with their families) may have moved further away from the office to save on rent and need time to re-adjust, so offering a grace period for their return could be beneficial for all involved.

Additionally, there may be accommodation requests from certain employees to consider under the Americans with Disabilities Act or similar state or federal laws. Those accommodations should be thoroughly considered and documented based on their specific facts and the nature of the request. If the company believes that in-office work is an essential job function for a particular role and intends to deny an accommodation request for remote work—especially if the role has been performed remotely for several years or months—it’s important to clearly articulate why the role is not suited for remote work. Identify what aspects are not working and provide a detailed rationale.

B. Pay Implications – Don’t Allow Payroll Nomads, Address Updates Matter

It’s also crucial for companies to have policies in place requiring employees to provide their current home and/or working address, especially if they are working remotely and have moved out-of-state or are moving to a new state to return to the office. Particularly for remote staff, periodically re-circulate the policies and/or ask employees to update or annually affirm their address is correct. This helps ensure compliance with all relevant state laws, and provide notice to employers that they may now be “operating” in states where previously employees were not operating.

For example, if an employee is hourly/non-exempt and must be paid overtime, certain states have overtime requirements that go well beyond the Fair Labor Standards Act (FLSA). Similarly, if an employee is categorized as exempt from overtime under the FLSA, some states have exemption tests or minimum salary requirements that far exceed federal FLSA standards. Regular audits are essential to ensure employees who have moved to different states are paid and categorized appropriately under both the FLSA and state laws.

By maintaining accurate address records and conducting regular compliance audits, companies can navigate the complexities of state-specific wage and hour laws and ensure appropriate pay and treatment of all employees.

C. Space and Equipment Analysis

If your company has been fully remote since the start of the COVID-19 pandemic and is now asking employees to return after five-plus years, it’s time to dust off the office and ensure you have enough space and equipment to accommodate everyone. Consider whether certain staff hired during the pandemic have never reported to an office. What preparations (office or desk assignments, screens and monitors, telephones) need to be made before asking them to return?

For hybrid workers who alternate between remote and in-office work and might share an office space with a colleague who comes in on the days they do not, plan for contingencies to ensure everyone has a seat at the table, even if they are in the office at the same time. Proper planning and organization will help make the transition smoother for everyone involved.

D. Expense Check: Revisiting Reimbursement Policies

If your company is providing office space and asking employees to return, but still allowing remote work as a perk, it’s important to reevaluate reimbursement policies, especially in states with expense reimbursement laws. Confirm whether the company is currently reimbursing employees for home Wi-Fi, personal internet, and other home office expenses. Review whether certain reimbursements can be discontinued now that remote work is solely a perk and not a requirement (in any instance), in accordance with state expense reimbursement laws. In Illinois, for example, expenses incurred that were “necessary” must be reimbursed. Showing an expense is “necessary” is more difficult when an employee chooses to work from home as solely a perk, but could otherwise report to an office, and does not work afterhours or on weekends on a remote basis. California law, by contrast, may require reimbursement for reasonably incurred expenses, even when the employee chooses to work from home, and even when such expenses would have been incurred even if the employee did not work remotely. This includes use of their personal cell phone or their home WiFi.

E. Every Minute Counts: Tracking Hours for Remote Employees

Working from home creates numerous opportunities for employees to work without the employer’s knowledge. Increased productivity is wonderful, but particularly for non-exempt employees, it is crucial that company policies ensure employees are compensated at their applicable regular or overtime rate for all hours worked. It’s important to make clear in your policy that employees must notify their employer of all working time, so the company has knowledge of the hours worked. Even if the company does not technically have knowledge, knowledge can be imputed in certain instances (meaning the company should have known and thus is treated as if it knew the employee was working).

One way to address this concern is by permitting employees to self-report their time worked each day, starting with the time they begin and end work, but excluding any non-working time. Employers can also require employees to attest with each time submission that they have reported all of their hours worked. If any employee repeatedly works without tracking their hours worked and the employer becomes aware of the same it must compensate the employee, but it may also be appropriate to issue discipline for such a policy violation. These measures can help combat a claim that the employee did not know they had an obligation to report all hours worked.

F. Managing Flexible Work Arrangements

The continuous workday concept under the FLSA provides, aside from meal periods, all time from the first activity of the day to the last activity of the day is compensable, including breaks. This rule became confusing during the COVID-19 pandemic and beyond, as companies allowed and continue to allow employees more flexibility to set their work hours. For instance, instead of working 9:00 a.m. to 5:00 p.m. with a 30-minute lunch break, an employee might work 9:00 a.m. to 1:00 p.m., go to the gym from 1:00 p.m. to 2:00 p.m., pick up their child from school and eat lunch from 2:30 p.m. to 3:00 p.m., and log back in from 3:00 p.m. to 6:30 p.m.

Such flexibility enables employees to feel in control of their life and time and offers numerous benefits, from increased productivity to improved mental health and higher retention rates. However, is all such time compensable under the continuous workday rule? The short answer is no—a company need not pay an employee for time during their workday when they engage in purely personal pursuits such as childcare or working out. To ensure lines are not blurred, however, having a general mapped-out workday, even a non-traditional one, that is specific to a particular employee, can help ensure employees are working the requisite hours and tracking them accurately.

This is also crucial to ensure employees take their meal breaks at the appropriate times, as required by applicable state laws. For instance, some states mandate meal breaks after a certain number of hours worked. Additionally, if an employee voluntarily works through their meal break on a particular day, the company must comply with any state laws that require the meal or break period to be compensable if missed or not provided. By staying informed about state-specific regulations and implementing clear policies with parameters surrounding the same, companies can ensure compliance and fair treatment of employees.

Conclusion: Crafting a Successful Remote Work or In-Office Strategy

Whether your company opts for fully remote work, a hybrid model, or a full return to the office, it’s essential to consider the legal implications and employee relations, in addition to the impact on the business and its operations. Thoroughly review employment contracts, where employees are working, reimbursement, and time tracking policies to ensure compliance with state and federal laws. Proper planning and clear communication can help navigate the complexities of remote work arrangements, maintain employee morale, and ensure fair treatment for all staff members. By staying informed and proactive, companies can create a work environment that balances flexibility with legal and operational requirements.

Seyfarth Synopsis: In 2023, the Federal Motor Carrier Safety Administration (“FMCSA”) under the Biden administration started accepting public comments about the many petitions for waiver that key stakeholders, including the California Attorney General, had submitted. These petitions sought waivers from the FMCSA’s 2018 determination preempting California and Washington’s meal and rest break rules for truck drivers. Many commentators—including this one—anticipated that the Biden administration would grant the waiver, in effect reinstituting state meal and rest period laws for truck drivers. But the Biden administration never took action on those petitions, and it is unlikely that the new administration will. The upshot of this is that truck drivers will continue to have no right to meal and rest periods under California state law, and the failure to provide truck drivers with compliant meal and rest periods under state law cannot be the basis for a lawsuit under the Labor Code.

In December 2018, the FMCSA under the first Trump administration concluded that the federal Motor Carrier Safety Act preempts California’s meal and rest break rules when a driver is subject to federal hours-of-service requirements.

In a potential shift, the FMCSA announced in August 2023 that it would start accepting petitions for waivers from its own preemption determinations. The agency’s announcement under the Biden administration signaled a shift in the agency’s view of the preemption determination over more employee-friendly state rules, or at least a shift in the politics surrounding the issue after the exit of the prior administration. Then, by December 2023, the FMCSA was soliciting comments from the public in response to multiple petitions requesting waivers. This included the opportunity to respond to the California Attorney General’s broad petition submitted on behalf of California’s driver in November 2023, discussed here.

The petitions for waiver, and the comments from the public in response, have been pending for well over one year. The Biden administration did not take action on those petitions. The new administration could theoretically take action on the petitions. But it seems these efforts to reinstitute state meal and rest period laws for truck drivers have stalled on the side of the road, with no relief in sight. The preemption determination was issued during the first Trump administration; it’s unlikely that the second Trump administration would effectively nullify the preemption determination that it issued the first go-around.  

As discussed previously, the issue of whether drivers are subject to state meal and rest break rules will remain in flux as a result of legal and political considerations. Employers should continue to keep their eye on these developments.