Co-authored by Alex Passantino and Kevin Young

On Tuesday, the Wage & Hour Division announced a new program for resolving violations of the FLSA without the need for litigation. The Payroll Audit Independent Determination program—or “PAID”—is intended to facilitate the efficient resolution of overtime and minimum wage claims under the FLSA. The program will be conducted for a six-month pilot period, after which time WHD will review the results and determine how best to proceed.

PAID should be welcome news for compliance-minded employers. In the vast majority of cases, FLSA claims must be resolved through litigation or under WHD’s supervision. Given the proliferation of FLSA litigation, many employers have, in recent years, conducted proactive audits with legal counsel to ensure compliance with the Act. Oftentimes, employers who identified past issues through those efforts were reluctant to approach an enforcement-happy WHD to request supervision of back wage payments due to concern that doing so would trigger litigation. Employers were stuck between a rock and a hard place.

By providing a mechanism for proactively resolving wage-hour issues without the need for litigation, the PAID program should increase the incentive for employers to conduct formal audits of their wage-hour practices.

While we expect details on the PAID program, including an official launch date, to crystallize in the weeks to come, the WHD has already provided guidance on the contours of the program. According to WHD, an eligible employer who wishes to participate in the program must:

  • Specifically identify the potential violations,
  • Identify which employees were affected,
  • Identify the timeframes in which each employee was affected, and
  • Calculate the amount of back wages the employer believes are owed to each employee.

The employer must then contact WHD to discuss the issue(s) for which it seeks resolution. Following that discussion, WHD will inform the employer of the manner in which the employer must provide required information, including:

  • Each of the calculations described above—accompanied by evidence and explanation;
  • A concise explanation of the scope of the potential violations for possible inclusion in a release of liability;
  • A certification that the employer reviewed all of the information, terms, and compliance assistance materials;
  • A certification that the employer is not litigating the compensation practices at issue in court, arbitration, or otherwise, and likewise has not received any communications from an employee’s representative or counsel expressing interest in litigating or settling the same issues; and
  • A certification that the employer will adjust its practices to avoid the same potential violations in the future.

At the conclusion of the process, the employer must make back wage payments. That process may look similar to the end of a WHD investigation in which violations are found. If an employee accepts the back wages, she will waive her rights to a private cause of action under the FLSA for the identified issues and timeframe. An employee who chooses not to accept the back wages will not be impacted.

We will share more as additional information becomes available. If you have any questions about the PAID program, the planning or execution of a proactive wage-hour audit, or any related issues, please do not hesitate to contact us.

By Loren Gesinsky and Jacob Oslick

Seyfarth Synopsis: The DOL has reissued 17 opinion letters it withdrew in 2009.  It has also issued two new field assistance bulletins.  The DOL’s new openness to answering employer questions, and providing written guidance, harbors good things for both employers and employees.

Hey-la, hey-la, opinion letters and field assistance bulletins are back!  They’ve been gone for such a long time.  But they’re back, and they’re coming to provide needed clarity on how employers can comply with wage and hour laws.  That’s the message the U.S. Department of Labor’s Wage and Hour Division sent last Friday, January 5th, when it reissued 17 opinion letters that it withdrew in March 2009.

The reissued letters include 15 drafted by former DOL Acting Administrator Alex Passantino, now a Seyfarth Partner.  They cover topics such as whether athletic coaches qualify as “teachers” for purposes of the administrative exemption (generally yes, if coaching is their “primary duty”), and whether a per diem “job bonus” could be excluded from a non-exempt employee’s regular rate (in short, “no”).   The reissuances follow on the heels of the DOL’s decision, in June 2017, to once again respond to employer questions regarding wage and hour laws by issuing formal guidance in the form of an opinion letter.  [We previously covered the DOL’s announcement here].   And it was accompanied by the issuance, also on January 5th, of two new field assistance bulletins, with one concerning interns at for-profit employers [see our blog post here].

For employers, the benefits of DOL opinion letters and field assistance bulletins are obvious.  The Fair Labor Standards Act contains a “good faith” defense that allows employers to avoid liability if they can prove the challenged pay practice aligns with the DOL’s written guidance.  Thus, if an employer requests and receives an opinion letter stating that a particular pay practice is compliant, that can protect employers from lawsuits — effectively telling overly zealous plaintiffs’ attorneys to take a permanent vacation from challenging the practice.

What is less well known is how employees also stand to benefit from the DOL’s decision to again issue opinion letters.  To this end, it’s important to remember that the DOL’s job isn’t to give employers a legal beating or make them sorry they were ever born..  It’s to ensure that employers pay their workers properly, and otherwise comply with the law.  And, just as a “positive” opinion letter can help an employer defend a policy in court, a “negative” opinion letter sends an awfully strong warning to the requesting employer and similarly situated employers to change their policies fast.

For employees — although not necessarily plaintiffs’ attorneys — this seems far preferable to simply letting a potentially unlawful pay practice continue indefinitely.  True, at some point, a disgruntled employee may file suit and claim that the employer is cheating him or her.  And, ultimately, that may lead to a jackpot verdict with liquidated damages for the employee or a collective.  But lawsuits are comparatively rare and, when successful, often result in the plaintiffs’ attorneys receiving far more money than the affected employees.  By the time a lawsuit may happen to get filed and a collective is conditionally certified (if conditional certification is granted), employees may have worked for many years under an improper practice — and thus be time-barred from recovering damages for the entire period.   Then the lawsuit may not succeed, or it may take years to recover anything.   Most likely, it will lead to a settlement that will offer employees a fraction of their allegedly lost pay.   Conversely, if an employer changes its pay practices in response to “negative” guidance from the DOL, employees obtain relief immediately.

All that said, the impact of the DOL’s new openness to opinion letters is not yet known.  Opinion letters will take some wage and hour disputes and cut them down to size.  But, historically, the DOL was not able to answer all employer inquiries. Those to which the DOL did respond generally involved highly-detailed, specific fact patterns that did not necessarily afford comfort to anyone other than the employers who posed the questions.  Indeed, although the DOL began accepting requests for opinion letters back in June, and reissued the withdrawn letters from 2009, it has not yet issued a new opinion letter.  Is that a harbinger of little to come?  We hope not.  Now that opinion letters are back, there’s reason to hope that things will be fine. [Cue to “My Boyfriend’s Back”, by the Angels.]

Authored by Robert Whitman

Seyfarth Synopsis: The Department of Labor has scrapped its 2010 Fact Sheet on internship status and adopted the more flexible and employer-friendly test devised by Second Circuit.

In a decision that surprised no one who has followed the litigation of wage hour claims by interns, the US Department of Labor has abandoned its ill-fated six-part test for intern status in for-profit companies and replaced it with a more nuanced set of factors first articulated by the Second Circuit in 2015. The move officially eliminates agency guidance that several appellate courts had explicitly rejected as inconsistent with the FLSA.

The DOL announced the move with little fanfare. In a brief statement posted on its website on January 5, it said:

On Dec. 19, 2017, the U.S. Court of Appeals for the Ninth Circuit became the fourth federal appellate court to expressly reject the U.S. Department of Labor’s six-part test for determining whether interns and students are employees under the Fair Labor Standards Act (FLSA).

The Department of Labor today clarified that going forward, the Department will conform to these appellate court rulings by using the same “primary beneficiary” test that these courts use to determine whether interns are employees under the FLSA. The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.

The DOL rolled out the six-part test in 2010 in a Fact Sheet issued by the Wage and Hour Division. The test provided that an unpaid intern at a for-profit company would be deemed an employee under the FLSA unless all six factors—requiring in essence that the internship mirror the type of instruction received in a classroom setting and that the employer “derive[] no immediate advantage from the activities of the intern”—were met. The upshot of the test was that if the company received any economic benefit from the intern’s services, the intern was an employee and therefore entitled to minimum wage, overtime, and other protections of the FLSA.

Spurred by the DOL’s guidance, plaintiffs filed a flurry of lawsuits, especially in the Southern and Eastern Districts of New York. But despite some initial success, their claims were not well received. The critical blow came in 2015 from the Second Circuit, which in Glatt v. Fox Searchlight Picture Searchlight emphatically rejected the DOL’s test, stating, “[W]e do not find it persuasive, and we will not defer to it.” Instead, it said, courts should examine the internship relationship as a whole and determine the “primary beneficiary.” It crafted its own list of seven non-exhaustive factors designed to answer that question. Other courts soon followed the Second Circuit’s lead, capped off by the Ninth Circuit’s ruling in late December.

For the new leadership at the DOL, that was the final blow. In the wake of the Ninth Circuit’s decision, the agency not only scrapped the six-factor test entirely, but adopted the seven-factor Glatt test verbatim in a new Fact Sheet.

While the DOL’s action marks the official end of the short-lived six factors, the history books will note that the Glatt decision itself was the more significant event in the brief shelf-life of internship litigation. As we have noted previously in this space, the Glatt court not only adopted a more employer-friendly test than the DOL and the plaintiffs’ bar had advocated; it also expressed grave doubts about whether lawsuits by interns would be suitable for class or collective action treatment. The DOL’s new Fact Sheet reiterates those doubts, stating, “Courts have described the ‘primary beneficiary test’ as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.”

That aspect of the ruling, more than its resolution of the merits, was likely the beginning of the end for internship lawsuits. In the months and years since Glatt was decided, the number of internship lawsuits has dropped precipitously.

At this point, only the college student depicted recently in The Onion  seems to be holding out hope. But as we’ve advised many times, employers should not get complacent. Unpaid interns, no matter how willing they are to work for free, are not a substitute for paid employees and should not be treated as glorified volunteer coffee-fetchers. As the new DOL factors make clear, internship experiences still must be predominantly educational in character. If not, it will be the interns (and their lawyers) giving employers a harsh lesson in wage and hour compliance.

Authored By Alex Passantino

As we’ve reported previously, among the items the Department of Labor identified earlier this year in its Regulatory Agenda was a Notice of Proposed Rulemaking (NPRM) seeking to rescind portions of a 2011 rule that restricted tip pooling for employers who do not use the tip credit to satisfy their minimum wage obligations. On October 24, 2017, that NPRM was sent to the White House Office of Information and Regulatory Affairs (OIRA) for review and approval. One of the cases challenging the validity of the 2011 rulemaking may be on its way to the Supreme Court, with the Administration’s response to a cert petition due on November 7. With that deadline looming, it’s possible that the Administration is seeking to moot the issue before the Supreme Court has the chance to address some of the issues related to agency deference.

After OIRA clears the NPRM, it will be sent to the Federal Register for the public to provide comments in response to the Department’s proposal. At that time, we’ll know the specifics of the proposal and will be able to provide more guidance on what this means for employers. Stay tuned.


Co-authored by Abigail Cahak and Noah Finkel

Seyfarth Synopsis: The Ninth Circuit has created a circuit split by rejecting the DOL’s interpretation of FLSA regulations on use of the tip credit to pay regularly tipped employees, finding that the interpretation is both inconsistent with the regulation and attempts to create a de facto new regulation.

The Ninth Circuit Court of Appeals issued an important and restaurant-friendly decision rejecting the Department of Labor’s interpretation of FLSA regulations on the use of the tip credit when paying regularly tipped employees.

In Marsh v. J. Alexander’s, the Ninth Circuit addressed a number of actions brought by servers and bartenders who alleged that their employers improperly used the tip credit and thus failed to pay them the required minimum wage. Relying on DOL interpretive guidance, the plaintiffs asserted that their non-tip generating duties took up more than 20% of their work hours, that they were employed in dual occupations, and that they were thus owed the regular minimum wage for that time. The district court dismissed the case, holding that Marsh had not alleged a dual occupation and that deference to the DOL guidance underpinning his theory of the case was unwarranted. Marsh appealed.

Under the FLSA’s regulations, an individual employed in dual occupations–one tipped and one not–cannot be paid using the tip credit for hours worked in the non-tipped occupation. The regulations clarify, however, that “[s]uch a situation is distinguishable from that of a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee[,] and occasionally washing dishes or glasses. . . . Such related duties in an occupation that is a tipped occupation need not by themselves be directed toward producing tips.” Yet, current DOL guidance imposes time and duty-based limitations not present in the regulations: the tip credit may not be used if an employee spends over 20% of hours in a workweek performing duties related to the tipped occupation but not themselves tip-generating. The guidance goes on to state that an employer also may not take the tip credit for time spent on duties not related to the tipped occupation because such an employee is “effectively employed in dual jobs.” That guidance had been followed by the Eighth Circuit Court of Appeals and several lower courts. It created a feeding frenzy among some plaintiffs’ lawyers, causing restaurant employers to ask servers and bartenders to track their time spent on various activities down to the minute, or risk facing a collective action lawsuit in which they have to try to rebut a servers’ claims that they had spent excessive time on activities that arguably were not tip producing.

The Ninth Circuit, however, concluded in Marsh that the DOL’s guidance was both inconsistent with the FLSA regulations and attempted to create a de facto new regulation such that it did not merit deference. In particular, the court noted the regulations’ focus on dual occupations or jobs as contrasted with the DOL guidance: “[i]nstead of providing further guidance on what constitutes a distinct job, [the DOL] takes an entirely different approach; it . . . disallows tip credits on a minute-by-minute basis based on the type and quantity of tasks performed. Because the dual jobs regulation is concerned with when an employee has two jobs, not with differentiating between tasks within a job, the [DOL’s] approach is inapposite and inconsistent with the dual jobs regulation.” Moreover, the DOL guidance “creates an alternative regulatory approach with new substantive rules . . . [and] ‘is de facto a new regulation’ masquerading as an interpretation.”

In so holding, the Ninth Circuit broke with the Eighth Circuit’s 2011 decision in Fast v. Applebee’s International, Inc. and explicitly rejected the Eighth Circuit’s analysis in that case. We previously blogged about the Fast decision here.

Marsh creates a circuit split and is particularly notable coming from the frequently employee-friendly Ninth Circuit. There remains, however, contrary authority in many parts of the country, and the decision has no bearing on state laws, some of which may nonetheless follow the DOL’s reasoning. It’s also likely that this Ninth Circuit panel does not have the last word on this issue. This opinion could receive further review by the full Ninth Circuit or by the Supreme Court, and if the Supreme Court does not resolve the circuit split, other appellate courts are likely to weigh in. Regardless, the decision points out the absurdities of the DOL’s current position and demonstrates the need for guidance on the issue from the DOL once its’ appointees are in place.

Authored by Alex Passantino

The White House announced its intent to nominate Cheryl Stanton to serve as the Administrator of the U.S. Department of Labor’s Wage & Hour Division. Stanton currently serves as the Executive Director for the South Carolina Department of Employment and Workforce. Prior to that, she worked in private practice as a management-side labor and employment attorney. She also previously served as Associate White House Counsel for President George W. Bush, where she was the administration’s principal liaison to the U.S. Department of Labor, the National Labor Relations Board, and the Equal Employment Opportunity Commission.

Ms. Stanton is nominated to join a Labor Department in which only Secretary of Labor Alexander Acosta has successfully navigated the Senate confirmation process. Deputy Secretary nominee Patrick Pizzella was formally nominated in June 2017; his nomination remains pending in the Senate. With a full Fall agenda including Hurricane Harvey (and likely Irma) relief, the debt ceiling, tax reform, border wall funding, and potential immigration-related issues, it is unclear when the Senate might confirm Ms. Stanton. It would not be surprising to see her nomination linger until the end of the year–or even into 2018.

When she does arrive at WHD, she’ll be facing a full plate of issues as the agency tackles a new rulemaking process increasing the salary level required for exemption under the FLSA’s white-collar exemptions, a proposal revising the rules surrounding tipped employees and the use of tip credit, and, presumably, filling the vacuum left by the Department’s withdrawal of the Administrator Interpretations on independent contractors and joint employment. In addition, with the Department’s announcement that it would once again be issuing opinion letters, there’s likely to be quite a queue of requests awaiting Ms. Stanton’s review.

We’ll keep you posted as Ms. Stanton’s nomination works its way through the confirmation process.


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

Seyfarth Synopsis: On Thursday afternoon, a federal judge in Texas issued an order officially invalidating the U.S. Department of Labor’s 2016 overtime rule, which would have more than doubled the minimum salary level for most overtime-exempt employees. While the long awaited ruling brings a measure of closure for employers, the possibility of appeal, as well as the new administration’s efforts to revise the existing overtime exemption rules, will be critical issues for employers watch in the weeks and months to come.

For nearly a year, employers have been watching and waiting as litigation challenging the Obama administration’s revision to the FLSA’s executive, administrative, and professional (“EAP”) exemptions—a revision intended to make millions of more Americans eligible for overtime pay—wound its way through litigation in the Eastern District of Texas and the Fifth Circuit of Appeals. As of Thursday afternoon, the waiting is over: District Judge Amos Mazzant issued an order invalidating the revised rule.

The Obama DOL’s revised rule, which was finalized in the summer of 2016 and slated to take effect on December 1, 2016, would have increased the salary level required for EAP employees from $455 per week (i.e., $23,660 per year) to $913 per week (i.e., $47,476 per year). The rule also called for automatic, inflation-indexed updates to the salary level every three years. Ultimately, the revised rule did not become effective on December 1, however, because Judge Mazzant issued an order days prior that preliminarily enjoined it from going into effect.

District Judge Mazzant issued his order in two consolidated lawsuits challenging the DOL for acting beyond its rulemaking authority. The order was the result of a motion filed by a group of state attorneys general who argued that the DOL’s rulemaking was invalid, in part because it exceeded the authority Congress gave DOL to define who is a “bona fide” EAP employee who should not be entitled to overtime pay. At about the same time that the “state plaintiffs” filed their motion for preliminary injunction, which the district court granted, another set of plaintiffs—a group of business associations (“business plaintiffs”)—filed an expedited motion for summary judgment, advancing similar arguments that the DOL’s rulemaking was unlawful.

After Judge Mazzant granted the state plaintiffs’ preliminary injunction motion, the Obama DOL filed an interlocutory appeal in the Fifth Circuit attacking the injunction order. Importantly, however, this was just before the Trump Administration took office. Ultimately, briefing in the appeal was delayed as a new president settled into office and his new Labor Secretary, Alexander Acosta, took the helm at DOL. In doing so, Secretary Acosta and his Acting Solicitor were required to assess how to maneuver a proceeding involving an injunction order that on the one hand blocked the implementation of an overtime rule championed by the prior administration, but on the other hand suggested that the DOL might not have authority to set any salary level for the EAP exemptions, despite having done so for nearly eighty years.

In the meantime, the business plaintiffs’ motion for summary judgment lingered before the district court.

Thursday’s ruling was preceded by a recent flurry of activity. On Wednesday, for example, Judge Mazzant issued an order confirming no further argument was necessary on the summary judgment motion. The court also collapsed the state plaintiffs’ and business plaintiffs’ cases together and joined the state plaintiffs to the business plaintiffs’ pending summary judgment motion. Nevertheless, it seemed unlikely that Judge Mazzant would rule on the summary judgment motion before hearing from the Fifth Circuit regarding his earlier preliminary injunction order. After all, an appellate ruling on whether it was proper to preliminarily enjoin the new rule certainly could have impacted or at least informed Judge Mazzant’s reasoning on whether the rule should be declared invalid, as the summary judgment motion argued it should.

Meanwhile, at the Fifth Circuit, oral argument was slated for October 3, and the parties were jockeying for an opportunity to be heard. The business plaintiffs, who were not parties to the appeal, requested permission to appear as amici at the oral argument. Soon thereafter, all parties filed a motion to stay proceedings while they attempted to negotiate a deal that would eliminate the need for further proceedings. Indeed, even on Thursday as the district court was issuing its final judgment, the parties on appeal were filing various submissions with the Fifth Circuit.

So perhaps all were surprised when District Judge Mazzant issued orders finding that the DOL’s 2016 rulemaking was invalid, and that the AFL-CIO would not be joined to the case. The district court’s ruling on both of these issues is fairly straightforward. On the motion for summary judgment, which collapsed all parties and remaining issues into its walls, the court ruled as follows:

  • As associations and similar groups, the business plaintiffs had standing to challenge the DOL’s rulemaking.
  • The FLSA does in fact apply to state governments, contrary to the state plaintiffs’ arguments.
  • Applying Chevron deference analysis, the DOL exceeded its authority by setting a salary level test that in effect eliminated the need to consider whether employees performed duties that demonstrate their roles working in a bona fide EAP capacity, based on definitions that Congress would have understood at the time it enacted the FLSA.
  • The automatic updating provided by the DOL’s final 2016 rule was unlawful for similar reasons.
  • Clarifying an area of concern for the DOL and other stakeholders, the court did not rule on the question of whether the DOL has authority to set any salary level for the EAP exemptions. The court’s ruling concerned only the 2016 rulemaking, finding the heightened salary level under the revised rule goes too far.

In denying the AFL-CIO’s motion to intervene as a necessary or permissive party, the court reasoned:

  • The union’s motion was untimely, as it had been aware of the litigation and the issues on which it bore. Yet it waited to file its motion to intervene until material events had occurred in the litigation.
  • The union failed to show that the DOL and related defendants were not adequately representing the interests that it purported to protect.
  • The union had argued among its primary points that Secretary of Labor nominee Andrew Puzder would not protect those interests; but Alexander Acosta was confirmed as Secretary of Labor, meaning that Mr. Puzder’s potential actions never became a reality.
  • And the court would nevertheless not exercise its discretion to allow the union to join the case.

The question on everyone’s mind is: where does this leave us?

One easy answer is that with respect to the EAP exemption itself, the 2004 rule remains in place. Employees making $455 per week (i.e., $23,660 per year) and whose primary duty satisfies one of the EAP duties tests may be classified as exempt.

Beyond that, there are no easy answers. The parties are no doubt considering whether the district court’s summary judgment order, which purports to withdraw all prior rulings, renders the pending appeal moot or requires its dismissal. After all, the summary judgment motion decided by the district court presents largely the same issues currently before the Fifth Circuit—namely, the validity of the new overtime rule. Some commentators have already exclaimed that the district court’s order mooted the interlocutory appeal entirely. Our view is that the question could be more complicated. Suffice it to say, there’s a lot to digest.

Either way, it also remains unclear whether either side will appeal Thursday’s rulings. While one would assume that DOL will not, we can’t slam the door on the possibility. As we saw with the appeal of the preliminary injunction, even the new Administration’s policy differences may not override DOL’s desire to defend itself against court orders limiting its authority, as the preliminary injunction did and as the court’s summary judgment order appears to do. If DOL determines that there is an institutional need to preserve its rulemaking authority, then it is possible we might see a DOL-initiated appeal, which would further complicate the question of how the union might agitate the proceedings.

As for the AFL-CIO, next steps are even foggier at this moment. Given that the DOL has already signaled the commencement of new rulemaking on the EAP exemptions, the AFL-CIO may take the view that even a complete victory on appeal—i.e., one that would permit its inclusion in the case and the reversal of the district court’s summary judgment decision—would ring hollow, as it could be undone by the DOL’s efforts to formulate a new rule that would take the place of the Obama rule.

Without question, the Eastern District of Texas’s order invalidating the 2016 overtime rule brings a large measure of closure for employers waiting to learn whether the rule would ever go into effect. The completeness and finality of that closure will depend largely on whether the AFL-CIO seeks appeal, as well as the DOL’s anticipated efforts to implement a new rule altogether. We will, of course, continue to monitor and update you on these important events.

Authored by Alex Passantino

Seyfarth Synopsis: On July 26, 2017, the U.S. Department of Labor will publish its anticipated Request for Information on the White-Collar Overtime Exemption in the Federal Register. The RFI will give the regulated community 60 days to provide its comments in response.

The RFI seeks input on a wide variety of topics, many of which involve issues that have been raised since the Department published its final rule increasing the salary level over a year ago. With the salary level on hold, the Department has the opportunity to revisit the level–or at least to take the temperature of the regulated community.

The issues on which the Department seeks comment are:

  • Should the 2004 salary test be updated based on inflation? If so, which measure of inflation?
  • Would duties test changes be necessary if the increase was based on inflation?
  • Should there be multiple salary levels in the regulations? Would differences in salary level based on employer size or locality be useful and/or viable?
  • Should the Department return to its pre-2004 standard of having different salary levels based on whether the exemption asserted was the executive/administrative vs. the professional?
  • Is the appropriate salary level based on the pre-2004 short test, the pre-2004 long test, or something different? Regardless of answer, would changes to the duties test be necessary to properly “line up” the exemption with the salary level?
  • Was the salary level set in 2016 so high as to effectively supplant the duties test? At what level does that happen?
  • What was the impact of the 2016 rule? Did employers make changes in anticipation of the rule? Were there salary increases, hourly rate changes, reductions in schedule, changes in policy?  Did the injunction change that? Did employers revert back when the injunction was issued?
  • Would a duties-only test be preferable to the current model?
  • Were there specific industries/positions impacted? Which ones?
  • What about the 2016 provision that would permit up to 10% of the salary level to be satisfied with bonuses? Should the Department keep that? Is 10% the right amount?
  • Should the highly compensated employee exemption salary level be indexed/how? Should it differ based on locality/employer size?
  • Should the salary levels be automatically updated? If so, how?

Of course, the value of these responses ultimately is dependent on the Fifth Circuit’s decision on whether the salary test is permissible to begin with. Should the Fifth Circuit rule in the Department’s favor on that issue, the RFI responses will provide the Department with the information it needs to proceed on a new rulemaking adjusting the salary level…assuming the employer community responds.

For additional information on how to respond to the RFI, please contact or Alex Passantino at We’ll continue to update you as additional information becomes available.

Authored by Alex Passantino

Seyfarth Synopsis: The Wage & Hour Division announced its regulatory plan for the next year and it is less ambitious than some may have anticipated.  A request for information on the overtime rule and a proposal to rescind a limited tip credit regulation are all that is on the immediate horizon for employers.

Each spring and fall, Washington waits with bated breath as the Executive Branch releases its regulatory agenda. As the first pronouncement of some of the specifics of the Trump Administration’s regulatory plans, this year’s agenda was anticipated more than most. And now we have it

The Wage and Hour Division’s initial plans include the announced Request for Information on the white collar exemptions, which is expected to be published this month. An as-of-yet-unannounced action, however, is a notice of proposed rulemaking (NPRM) that would rescind aspects of the Department’s 2011 rule related to tipped employees. Specifically, the NPRM would seek comment on the Department’s proposal to rescind the portion of the rule that restricts tip pooling for employers who do not use the tip credit to satisfy their minimum wage obligations. That rule has been the subject of much litigation, with mixed results. One of the cases may be on its way to the Supreme Court, with the Administration’s response to a cert petition due on September 8. With the NPRM slated for an August publication, it’s possible that the Administration may be seeking to avoid review by the Supreme Court on some of the touchier issues related to the proper deference a federal agency should be afforded. We’ll keep you posted.

Finally, WHD has identified a long-term plan to revisit the Section 14(c) program. Section 14(c) of the FLSA permits, under certain circumstances, employment of individuals with disabilities at subminimum wages. It is a politically sensitive program, and one in need of updating. No timetable has been provided for the Department’s review.

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.