By: Phillip J. Ebsworth, Andrew Paley, and Michael Afar

Seyfarth Synopsis: The California Supreme Court addressed the split in appellate authority and held that trial courts do not have the inherent authority to strike a PAGA claim on manageability grounds.

In Estrada, the trial court had dismissed the plaintiff’s PAGA claim following a bench trial, on the grounds that the claim was “unmanageable.” The Supreme Court, agreeing with the Court of Appeal, held that a trial court cannot strike a PAGA claim solely on manageability grounds. In reaching its conclusion, the Supreme Court affirmed that PAGA claims should be manageable and a trial court can, and should, use the full tool box of case management procedures at its disposal to ensure that a PAGA claim is “effectively tried.” However, outright dismissal of the PAGA claim due to unmanageability alone is not a tool that the trial court has at its disposal.

The Supreme Court explicitly left open the question as to whether PAGA claims can be stricken to preserve an employer’s due process rights and noted that an employer-defendant has a due process right to present affirmative defenses and must be permitted to “introduce its own evidence, both to challenge the plaintiffs’ showing and to reduce overall damages” and if plaintiffs seek to use a statistical model to prove their claims, defendants “must be given a chance to impeach that model or otherwise show that its liability is reduced.”

For a more in-depth review of the Supreme Court’s decision and what it means for employers, you can find Seyfarth’s analysis here.

By: Clara L. Rademacher and Ryan McCoy

Seyfarth Synopsis: On December 26, 2023, the Federal Motor Carrier Safety Administration (“FMCSA”) announced they would be accepting comments from the public in response to multiple petitions requesting waivers from the agency’s determinations preempting California and Washington’s meal and rest break rules. This includes the opportunity to respond to the California Attorney General’s recent petition submitted on behalf of California’s drivers.

Many Entities And Organizations Submitted Petitions For Waivers

As previously written, the FMCSA announced in August 2023 that it would start accepting petitions for waivers from its own preemption determinations. Although the FMCSA in 2018 had determined that federal regulations preempted California law, the agency’s announcement 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. Nonetheless, the notice still left unclear important issues including the scope of the waivers the FMCSA may consider granting and whether the FMCSA is considering a wholesale elimination of its prior determinations in California.

The International Brotherhood of Teamsters, the Truck Safety Coalition Citizens for Reliable and Safe Highways and Parents Against Tired Truckers, William B. Trescott, and the State of California all submitted petitions requesting that the FMCSA waive its determination preempting California’s MRB rules for drivers of commercial motor vehicles subject to FMCSA’s hours of service (HOS) rules. The California Attorney General’s broad petition submitted in November 2023 was discussed here.

In response, the FMCSA recently announced on December 26, 2023 that it will accept comments on any issues raised in the submitted petitions for waiver or before February 26, 2024.

The FMCSA requests that comments address the following issues in response to the arguments advanced by the waiver petitions:

  1. Whether and to what extent enforcement of a state’s meal and rest break laws with respect to intrastate commercial motor vehicle drivers has impacted the health and safety of drivers.
  2. Whether enforcement of state meal and rest breaks as applied to interstate commercial motor vehicle drivers will exacerbate the existing truck parking shortages and result in more trucks parking on the side of the road and whether any such effect will burden interstate commerce or create additional dangers to drivers and the public; and
  3. Whether enforcement of a state’s meal and rest break laws as applied to interstate commercial motor vehicle drivers will dissuade carriers from operating in that state; and
  4. Whether enforcement of a state’s meal and rest break laws as applied to interstate property carrying or passenger carrying CMV drivers will weaken or otherwise impact the resiliency of the national supply chain.

Employers Should Remain Beware Of Looming Changes

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, including any action by the FMCSA on the petitions that were filed in response to the FMCSA’s unexpected invitation. This new public comment period also provides employers with an opportunity to provide their own valuable, unique insight into the issues raised by the waiver petitions that were submitted, which the FMCSA may use when determining whether to grant any of the waiver petitions that were submitted.

By: Phillip J. Ebsworth and Michael Afar

Seyfarth Synopsis: The first reported PAGA case of 2024 serves as a reminder of the importance of precise language for an enforceable PAGA waiver and the risks of including a “poison pill” provision in a class/representative/PAGA action waiver in arbitration agreements.

In DeMarinis, the First District affirmed the trial court’s denial of the employer’s motion to compel arbitration finding that the agreement contained a wholesale PAGA waiver in violation of Iskanian and a “poison pill” provision. As representative PAGA claims cannot be compelled to arbitration under Iskanian and Viking River, the Court concluded that the “poison pill” language prevented a grant of the employer’s motion. In fact, the Court noted that in the absence of the poison pill provision, the employer could have compelled the plaintiff’s individual Labor Code claims and individual PAGA claims to arbitration, and compelled waiver of the class claims. Instead, the employer is facing class and representative PAGA claims in state court.

The First District has provided employers another reminder to review their arbitration agreements. With the ever-evolving landscape of PAGA case law, time and attention should be given to the language of arbitration agreements and class and representative action waivers. In 2024, employers should resolve to schedule a new year’s check up of their arbitration agreement.

Seyfarth Synopsis:  Today the U.S. Department of Labor issued its final rule, attempting to define employee versus independent contractor status under the Fair Labor Standards Act (FLSA) (the “Final Rule”).  The Final Rule jettisons an earlier attempt under the prior Administration to modernize and simplify how to determine who is an employee and who is a contractor by focusing on two core factors. The Final Rule instead purports to return to an ambiguous totality-of-the-circumstances approach, while also placing a thumb on the scale in favor of more workers being deemed employees under the FLSA.

Background

The FLSA defines “employee” in an unhelpful, circular fashion. Section 3(e) of the FLSA defines the term “employee” as “any individual employed by an employer.” Section 3(d), in turn, defines “employer” to “include[e] any person acting directly or indirectly in the interest of an employer in relation to an employee.” 

In the absence of a concrete statutory definition of “employee,” and to distinguish between employees (who are covered by the FLSA) from independent contractors (who are not), court decisions predominately coalesce around some form of an “economic realities test,” in which courts balance several factors to determine if a worker is so dependent on the business to which they render services that they must be deemed an employee.  But application of the economic realities test has led to divergent outcomes based on similar facts. As summarized by Judge Easterbrook of the Court of Appeals for the Seventh Circuit, the economic realities test “is unsatisfactory both because it offers little guidance for future cases and because any balancing test begs questions about which aspects of ‘economic reality’ matter and why.”  Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1539 (7th Cir. 1988) (Easterbrook, J. concurring). 

In January 2021, the DOL issued an interpretation delineating how to define an employee versus a contractor under the FLSA (the “2021 Rule”).  In doing so, the DOL proposed to simplify the multi-factor test by setting forth two core factors to consider: (1) the nature and degree of the worker’s control of the work, and (2) the worker’s opportunity to earn a profit or loss. The proposal further provided that, if both factors point toward the same classification—whether employee or contractor—then the worker is likely to be classified as such. If, however, those factors point in opposite directions, then three other factors should be considered: (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship between the individual and the company, and (3) whether the work is part of an integrated unit of production. The 2021 Rule was a welcome development for the business community.

Following the change in administration, however, the DOL delayed the effective date of that rule and then (unsuccessfully) attempted to withdraw it in May 2021. 

The DOL’s New Interpretation

As we discussed here, on October 11, 2022, the DOL issued a notice of proposed rulemaking (“NPRM”) proposing to rescind the 2021 Rule and replace it with a multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA. And as we discussed here, here, and here, the NPRM proposed an analysis which skewed the inquiry in favor of employee status. The Final Rule largely adopts the NPRM, with a few exceptions, as noted below.

(1)        Totality-of-the-circumstances test. As with the NPRM, the Final Rule adopts a totality-of-circumstances test, eschewing the more targeted and focused inquiry under the 2021 Rule. Under this analysis, “no one factor or subset of factors is necessarily dispositive, and the weight to give each factor may depend on the facts and circumstances of the particular relationship.”  Absent from the Final Rule is any indication on how courts should weigh each factor, depending the particular facts and circumstances, or even the facts within each factor. Indeed, the DOL expressly declined to create an analytical framework that would provide businesses and workers “a scorecard or a checklist.” The Final Rule also appears to permit consideration of multiple facts across different factors, but provides no guidance on how that should occur, so that those individual facts will not be afforded outsized weight in the final analysis.

(2)        The worker’s opportunity for profit or loss depending on managerial skill. “This factor considers whether the worker has opportunities for profit or loss based on managerial (including initiative or business acumen or judgment) that affect the worker’s economic success or failure in performing the work.” The Final Rule helpfully clarifies that it is a worker’s “opportunities” for profit and loss, instead of whether the worker actually takes advantage of that opportunity, that is the touchstone under this prong. Under the NPRM, a worker’s unilateral choice to forego an entrepreneurial activity would have made employee status more likely. Under the Final Rule, however, it is the fact that the worker has the choice at all—and thus the ability to exercise his business judgment—that is indicative of independent contractor status. The Final Rule also added the language “including initiative or business acumen or judgment,” which was absent from the NPRM. This is a welcome addition because the NPRM focused merely on “managerial skill,” which narrowed the types of evidence indicative of independent contractor status.

(3)        Investments made by the worker and the employer. The Final Rule adopts the NPRM’s formulation that an investment borne by the worker must be capital or entrepreneurial in nature to indicate independent contractor status, and that investments should be assessed separately from the opportunities-for-profit-or-loss factor (unlike in the 2021 Rule). The Final Rule also adopts the NPRM’s approach that a worker’s investment “should be considered on a relative basis with the potential employer’s investments in its overall business.” However, the Final Rule clarifies that the comparison should be primarily qualitative, rather than quantitative—i.e., on whether the worker is making similar types of investments, not on the amount or size of the investments (which will almost always be greater for the alleged employer). Further, although the NPRM originally suggested that any cost borne by a worker to perform a job could not be evidence of capital or entrepreneurial investment, the Final Rule acknowledges that investments in tools and equipment may occur for many reasons beyond performance of a particular job, including the performance of more types of work, the reduction of costs, or the extension of market reach, and thus could be evidence of independent contractor status in certain circumstances.

(4)        Degree of permanence of the work relationship. The Final Rule states that the permanency factor “weighs in favor of the worker being an employee when the work relationship is indefinite in duration, continuous, or exclusive of work for other employers.” The NPRM originally provided that, where a lack of permanence is due to “operational characteristics that are unique or intrinsic to particular businesses or industries and the workers they employ,” that lack of permanence would not necessarily be evidence of independent contractor status. The Final Rule was adjusted to acknowledge that if the lack of permanence was both related to operational characteristics and the worker’s exercise of independent business initiative, it may be evidence of independent contractor status. The Final Rule, however, provides no clear guidance as to what qualifies as the worker exercising his business initiative in this context. The Department’s commentary also newly recognizes that the permanence factor cannot be reduced to mere considerations of length, and instead, can only be fully analyzed against the backdrop of a full understanding of the relationship between the worker and business (such as intermittent freelancing).

(5)        Nature and degree of the business’s control over the worker. The Final Rule largely adopts the NPRM with respect to the control factor. Facts relevant to control would include whether the employer sets the worker’s schedule, supervises the performance of the work, sets the price or rate for service, or explicitly limits the worker’s ability to work for others. One important change from the NPRM is that the Final Rule clarifies that “actions taken by the potential employer for the sole purpose of complying with a specific, applicable Federal, State, Trial, or local law or regulation are not indicative of control.”  In contrast, “actions taken by the potential employer that go beyond compliance . . . and instead serve the potential employer’s own compliance methods, safety, quality control, or contractual or customer service standards may be indicative of control.”  The DOL seems to be saying that strict compliance with health and safety standards imposed by law are not indicative of employee status, but if an employer goes beyond those standards (e.g., creates a safer work environment than strictly required) this “may” be indicative of employee status. This creates a potentially harmful disincentive: businesses that go beyond minimum safety standards risk having their independent contractors deemed employees. Equally problematic, the Rule provides no clarification of the meaning behind its “sole purpose” language. For example, a business may believe that imposition of a legally required standard has secondary value (indeed, most laws exist for some beneficial purpose beyond the mere fact of compliance). But it is unclear under the Final Rule’s articulation whether such a secondary consideration, even if it would have had no impact on the business’s act of complying with the law, could impact the analysis of this factor.

Separately, the NPRM originally provided that any means of technological “supervision” would be relevant evidence of control. The Final Rule, however, acknowledges that is not always the case, and provides that technological supervision is only evidence of control if used to “supervise the performance of the work.” That is, under the Final Rule, merely collecting data generated from the actions of a worker (e.g., that an item was delivered) is not necessarily evidence of control. However, if that data is paired with additional supervisory action, such as directing or correcting the worker’s conduct, it may be evidence of employer-like control under the Final Rule.

(6)        Extent to which the work performed is an integral part of the employer’s business. The DOL’s framing of this factor may be particularly problematic. The Final Rule states that “this factor does not depend on whether any individual worker in particular is an integral part of the business, but rather whether the function they perform is an integral part” and that when the work a worker performs is “critical, necessary, or central to the employer’s principal business,” then this factor weighs in favor of employer status. It begs the question of how to determine an employer’s “principal business” or what is “critical, necessary, or central to it,” though the DOL’s commentary to its proposal provides possible guidance. The Final Rule fails to offer any convincing explanation for its departure from the “integrated unit of production” standard used in the 2021 Rule and first articulated by the Supreme Court in Rutherford Food Corp. v. McComb, 331 U.S. 772 (1947), which largely rests on the DOL’s belief that using Rutherford’s actual language would be “overly rigid.”

(7)        Whether the worker uses specialized skills in performing the work. Under the Final Rule, like under the NPRM, if a worker “uses specialized skills and . . . those skills contribute to business-like initiative,” then the worker is more likely a contractor. In its commentary, however, the DOL proposes to define those skills narrowly. The DOL commentary also proposes that, even when a worker possesses specialized skills, that fact is irrelevant unless the work requires those skills.

Under the proposed rule, no one factor would be dispositive or entitled to predetermined weight. While on the one hand this may seem to lead to greater flexibility, it blurs lines, leads to inconsistent results, and provides businesses and workers little of the clarity that rulemaking on worker status was supposed to provide.

What’s Next and What Will It Mean

With the Department of Labor’s retreat from the 2021 Rule only a short time after it went into effect, businesses and workers alike are faced with yet another potential analytical test against which they must measure their work relationships. Although the Final Rule attempts to tilt the scale towards employee status in the average case, substantial questions remain about the ultimate impact of the Final Rule, including whether it will be afforded any deference from courts, whether it will survive an inevitable legal challenge, and whether (like the 2021 Rule) it will be in jeopardy in any administration change. In the meantime, businesses should review their independent contractor relationships in light of the Final Rule.

By A. Scott Hecker

Seyfarth Synopsis: On December 6, 2023, the Biden Administration announced the release of its Fall 2023 Unified Agenda of Regulatory and Deregulatory Actions. The U.S. Department of Labor’s Wage and Hour Division continues to pursue – with frequent delays – a number of significant rulemakings, including the Division’s proposed increase to the minimum salary level for white-collar exemptions.

While U.S. DOL Wage and Hour Division rulemakings have progressed since the Spring 2023 Regulatory Agenda, many big-ticket items remain in process with uncertain timelines. 

For example, the (extended) comment period on the Department’s rule, “Employee or Independent Contractor Classification Under the Fair Labor Standards Act,” closed approximately one year ago on December 13, 2022.  But the regulated community has yet to learn how the Department will address insights expressed in more than 55,000 comments to the proposed rule.  The current Regulatory Agenda lists November 2023 as the anticipated date for a final independent contractor rule.  Discerning readers may note November 2023 is now part of history.  In fact, the Biden Administration issued its current Regulatory Agenda in December, which comes after November, so one may wonder why DOL memorialized its latest failure to meet an estimated rulemaking deadline, rather than providing a revised estimate.

The Regulatory Agenda lists April 2024 as the estimated date for release of the final rule on the increase to the minimum salary level for white-collar exemptions.  DOL finally published its Notice of Proposed Rulemaking, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” on September 8, 2023.  Seyfarth submitted one of the 33,000+ comments received in response to this NPRM, and we see the April 2024 estimate to issue a final rule as . . . ambitious.  As you likely know, the rule seeks to increase the overtime threshold from $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year).  A footnote explains the threshold could increase, since the final rule will incorporate new wage data.  Hurdles the EAP rulemaking may face as it moves toward final form include Congressional Review Act issues, the November 2024 presidential election, and almost-certain litigation challenging the final rule’s validity.  For more details on the overtime exemption rule’s substance – and the Firm’s comment – please check out our relevant blog posts here and here.

One impactful rule WHD was able to carry across the finish line recently, “Updating the Davis-Bacon and Related Acts Regulations,” purports to clarify and modernize the DBA’s implementing regulations.  The rule went into effect on October 23, 2023, and we blogged about some of the key changes government contractors must address in response.  The updated regulations will also impact some employers that do not hold government contracts if they choose to comply with the Act’s prevailing wage and apprenticeship requirements to claim enhanced tax credits under the Inflation Reduction Act.  See here and here for thoughts on the IRA and its expected effects.

Employers should anticipate the Division will leverage all of its – limited – resources to achieve the Biden Administration’s wage-hour goals before the end of this presidential term.  It takes time to comply with new regulations, so it is prudent for businesses to consider steps they can take now to ensure compliance in the event pending rules become final and binding.

Please connect with the author or your favorite Seyfarth attorney with any questions about wage-hour issues or other compliance concerns.

Date and Time

Thursday, December 5, 2023
3:00 p.m. to 3:45 p.m. Eastern
2:00 p.m. to 2:45 p.m. Central
1:00 p.m. to 1:45 p.m. Mountain
12:00 p.m. to 12:45 p.m. Pacific

Register Here

About the Program

A lot has happened in the 10 years since our national Wage and Hour Litigation Practice Group wrote ALM’s authoritative Wage & Hour Collective and Class Litigation treatise.  We are excited to launch our informative webinar series to discuss—in bite-sized increments—the past decade’s most important changes to the state and federal employee pay litigation landscape.

During this series, the treatise’s authors, along with those who have contributed to the publication and key practice group members, will cover topics ranging from lawsuit fundamentals to arbitration to settlement strategies. 

Few topics have seen more change in the ten years since the treatise’s release than the law surrounding arbitration of wage-hour claims – both federally and in California. Our panel will discuss current law regarding class and collective action waivers in arbitration agreements, mass arbitration management, and best practices for drafting and implementing mandatory arbitration programs. 

Our Wage & Hour Collective and Class Litigation treatise, published by ALM Law Journal Press, is widely recognized as an authoritative resource on the subject and is commonly used by lawyers, judges, and academicians in researching the many complex and evolving procedural and substantive defense issues that may ultimately determine case outcomes. 

Get your copy here.

Speakers

Patrick J. Bannon, Partner, Seyfarth Shaw LLP
Daniel C. Whang, Partner, Seyfarth Shaw LLP
Kelly J. Koelker, Senior Counsel, Seyfarth Shaw LLP
Michael E. Steinberg, Associate, Seyfarth Shaw LLP

Register Here

If you were unable to attend our previous sessions, you can find recordings and materials available at the links below.

Time Well Spent: 10 Years of Wage & Hour Wisdom and What’s on the Way

Time Well Spent Session 2: Shifting Standards of Conditional Certification

Time Well Spent: Session 3: Certification and Decertification

The comment period on the U.S. DOL Wage and Hour Division’s Notice of Proposed Rulemaking, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” closed on November 7, 2023, with interested stakeholders having uploaded over 33,000 submissions.  Now the Department will need to read and respond in preparing its final rule.

Seyfarth gladly seized the opportunity to share its thoughts on the proposed rule with the Department, submitting a comment informed by its extensive wage-hour practice and its interactions with clients, associations, and other contacts across a broad range of industries.  The Firm’s submission, “intend[ed] to lend a measured and productive voice to this important process,” speaks to a number of concerns encapsulated in the proposed rule, including:

  • Negative ramifications of the proposed EAP and HCE exception salary thresholds, such as exceeding the threshold’s traditional “gatekeeper” function; disproportionally impacting certain areas and industries; causing wage compression; harming part-time employees; and infringing on worker flexibility.
  • Unjustified limitations on the amount and type of compensation that can be credited toward the salary thresholds, as well as the unnecessarily-short window to correct underpayments.
  • Unprecedented automatic increases to the salary thresholds based on improper indexing;
  • Problems with the Department’s methodology and assumptions; and
  • The failure to satisfy DOL’s goals, like reducing employee turnover and increasing work-life balance.

Seyfarth also explains employers will need more time to implement such drastic changes.  The proposed effective date would land 60 days after publication of the final rule, but the analytical and logistical processes required for coming into compliance are complex, particularly if performed mid-year, so may require significantly more time.

DOL declined to extend the comment period, suggesting the exemption rules have already gone through proposed and actual changes over the past several years, so everyone is familiar with the issues.  The Department may use a similar argument regarding implementation, i.e., employers already know how to make these changes and, therefore, should not need significant time to comply.

Further, DOL may already have responses in mind to anticipated lines of comment, which could speed up the timeline to publish a final rule.  Rulemaking schedules are made to be broken, but we can expect the Department and Division to move promptly.  It would not be out of bounds to expect a final rule published in late spring or early summer 2024, with an effective date around the 2024 election.

It remains possible – likely? – that any final rule will face legal challenges.  Though many employers may agree some increase in the salary thresholds is justified, steep increases could lead to litigation.  As the U.S. Supreme Court considers whether to maintain its historical deference to agency regulations, while courts more frequently employ the major questions doctrine, predicting the endgame for an overtime exemption final rule remains challenging.

For more on this or any related topic, please do not hesitate to connect with the author or your favorite member of Seyfarth’s Wage and Hour Practice Group.

Date and Time

Thursday, November 16, 2023
2:00 p.m. to 2:30 p.m. Eastern
1:00 p.m. to 1:30 p.m. Central
12:00 p.m. to 12:30 p.m. Mountain
11:00 a.m. to 11:30 a.m. Pacific

Register Here

About the Program

A lot has happened in the 10 years since our national Wage and Hour Litigation Practice Group wrote ALM’s authoritative Wage & Hour Collective and Class Litigation treatise.  We are excited to launch our informative webinar series to discuss—in bite-sized increments—the past decade’s most important changes to the state and federal employee pay litigation landscape.

During this series, the treatise’s authors, along with those who have contributed to the publication and key practice group members, will cover topics ranging from lawsuit fundamentals to arbitration to settlement strategies. 

Join us on November 16th for our third session, where our panelists will discuss:

  • Class certification and decertification under Rule 23 and state law analogues,
  • Recent developments affecting state law wage and hour class actions, and
  • Important differences in California.

Our Wage & Hour Collective and Class Litigation treatise, published by ALM Law Journal Press, is widely recognized as an authoritative resource on the subject and is commonly used by lawyers, judges, and academicians in researching the many complex and evolving procedural and substantive defense issues that may ultimately determine case outcomes. Get your copy here.

Speakers

Michael Afar, Partner, Seyfarth Shaw LLP
Ryan McCoy, Partner, Seyfarth Shaw LLP
Yao Li, Associate, Seyfarth Shaw LLP
Kelly Koelker, Senior Counsel, Seyfarth Shaw LLP

Register Here

If you were unable to attend our previous sessions, you can find recordings and materials available at the links below.

Time Well Spent: 10 Years of Wage & Hour Wisdom and What’s on the Way

Time Well Spent Session 2: Shifting Standards of Conditional Certification

By: A. Scott Hecker

The long wait for a Senate-confirmed U.S. DOL Wage and Hour Division (“WHD”) Administrator is over!  As of October 25, 2023, Jessica Looman has ascended to the top role in one of the Department’s premier enforcement agencies, winning confirmation 51-46.  Operating as Principal Deputy Administrator since January 20, 2021, Ms. Looman’s WHD was active even before she landed the big chair – and a great Capitol view from the Administrator’s Office – by, e.g., “modernizing” the Division’s Davis-Bacon regulations.  Now Ms. Looman has the political gravitas of Senate confirmation behind her as she continues to spearhead rulemaking efforts on independent contractor classification and overtime exemptions, as well as enforcement initiatives like battling child labor abuses.

Historically, presidential administrations have found it difficult to get their Administrator nominees approved, as stakeholders express significant interest in a role tasked with overseeing thorny issues like minimum wage, overtime, tipped work, and employee classification.  Ms. Looman did not engender the same level of resistance as President Biden’s initial Administrator nominee, Dr. David Weil, who served in the same role during the Obama Administration.  Dr. Weil was unable to secure the votes of Democratic Senators Joe Manchin, Mark Kelly, and Kyrsten Sinema (a Democrat at the time, now rebranded as an Independent), but Ms. Looman received support from all three.  She even collected a “Yea” vote from Republican Senator Dan Sullivan, making her confirmation bipartisan.

At the time of Ms. Looman’s nomination, the International Franchise Association (“IFA”) released a statement “congratulat[ing] Jessica Looman on her nomination to be Administrator of the Wage and Hour Division at the Department of Labor,” and noting “[i]n recent weeks, our members have had productive conversations with Acting Administrator Looman about the essential role that franchising plays in our economy and why it is critical that the Department of Labor serves to enforce existing law rather than create new policy.”  July 27, 2022 IFA Statement on Nomination of Jessica Looman to Labor Department Wage and Hour Division.  Further, IFA indicated it “look[ed] forward to working together” with Ms. Looman.  Id. 

Not everyone is a fan, however, and Ms. Looman will undoubtedly face headwinds in her confirmed role.  For example, responding to Ms. Looman’s nomination, and opining on her union background, House Education and Labor Committee Chair Virginia Foxx commented:

Under an “Administrator Jessica Looman,” we can expect to see more of the same bureaucratic antics that have plagued Biden’s WHD since the beginning.  Under Looman’s tenure, we’ve already seen the WHD undercut the Trump administration’s independent contractor rule, implement more burdensome regulations under the Davis-Bacon Act, and end compliance assistance, including the PAID program.  As a former union official, Jessica Looman will likely keep the WHD’s bar incredibly low while throwing workers, employers, and independent contractors under the bus.

Congresswoman Foxx also recently made clear her displeasure with the Department’s and Division’s insistence that the comment period on the notice of proposed rulemaking, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” remains at 60 days.  Along with this kind of congressional pushback, Ms. Looman must keep navigating the turbulent waters of enforcement staff attrition, which will likely limit WHD’s ability to execute on its various, competing priorities. 

Going forward, though, Administrator Looman will face such challenges wearing the badge of Senate confirmation.

For more on this or any related topic, please do not hesitate to connect with the author or your favorite member of Seyfarth’s Wage and Hour Practice Group.

By Lennon Haas and Noah Finkel

Seyfarth Synopsis:  Employers frequently struggle with questions around the compensability of certain activities, classification of employees, and how to structure their policies to avoid Fair Labor Standards Act violations.  Getting the answers wrong can be costly.  But getting them wrong without making reasonable efforts to comply with the law doubles an employer’s exposure.  According to a recent Eastern District of Pennsylvania decision, consulting an experienced labor and employment attorney and implementing policies responsive to that advice can avoid that double trouble.

Many a manufacturer requires its line level employees to wear protective clothing on the job.  And many a case has been litigated over whether time spent donning and doffing that clothing is compensable. 

East Penn Manufacturing Co. found itself embroiled in one such case brought by the Department of Labor that involved employees who worked with lead while making batteries and related components.  A trial determined that East Penn violated the FLSA and owed $22,253,087.56 in back wages.  The DOL asked the court after trial to impose liquidated damages (which double the amount of a back pay award) on East Penn, arguing that the company had not acted in good faith in its attempts to comply with federal law and had no reasonable grounds to believe it had complied with the FLSA.

The court disagreed.  To avoid liquidated damages in FLSA cases, an employer must show that it acted in good faith and had reasonable grounds to believe it complied with the law.  Good faith, said the court, is a subjective requirement that requires employers to “have an honest intention to ascertain and follow” the FLSA.  Reasonableness, meanwhile, “imposes an objective standard” that asks what a reasonably prudent [person] would” do “under the same circumstances.” 

East Penn proved both that it acted in good faith and reasonably.  Every time a donning and doffing issue arose—something that happened in 2003 and 2016—East Penn “took affirmative action to ascertain its FLSA obligations.”  In 2003, the company directed its outside labor and employment attorney to analyze two DOL donning and doffing settlements and advise East Penn about its own compensation policies.  Upon receipt of the lawyer’s memo and recommendations, East Penn adopted one of their attorney’s “solutions” and promulgated a new compensation policy for donning and doffing time.

In 2016, East Penn learned of an OSHA complaint “about the amount of paid time allotted for showering.”  The company revised its compensation policy yet again and solicited the same lawyer’s input on the new proposed policy’s legal compliance.  The lawyer approved the policy and the company implemented it.

“In other words,” said the court, “East Penn relied in good faith on the advice of a properly experienced labor and employment attorney” who himself tried to ascertain if the company’s donning and doffing policies complied with the FLSA.  Indeed, East Penn “tailored its policies in response to, and consistent with” its lawyer’s advice.

For many of the same reasons, the court also held that East Penn acted in an objectively reasonable manner.  The “legitimate legal uncertainty about the compensable status” of donning and doffing time coupled with the company’s actions in response to that uncertainty led the court to conclude “that East Penn was objectively reasonable as a matter of law.”  The court thus denied the DOL’s request for liquidated damages and East Penn was able to avoid paying an extra $22,253,087.56.

For employers facing uncertainty about their compensation policies, classification decisions, or other wage and hour related issues, this opinion provides a roadmap for how to avoid the imposition of liquidated damages in the event liability is found.  Step one is diligently endeavoring to learn what the FLSA requires of an employer.  Step two is structuring policies and conduct accordingly.  And the most efficient, easy-to-prove way of doing both of those is, according to East Penn, by consulting experienced wage and hour counsel.

Those with questions or concerns about compliance with the FLSA or similar state laws should feel free to reach out to a member of Seyfarth Shaw LLP’s world class wage and hour team for additional guidance.