State Plaintiffs Urge Fifth Circuit to Affirm Nationwide Injunction Blocking DOL Overtime Rule

In the latest round in the litigation between 21 States, led by the State of Nevada, and the Department of Labor regarding the Final Rule, the State Plaintiffs filed their appeal brief today with the Fifth Circuit, urging the Court to affirm the district court’s order, which issued a nationwide injunction blocking the rule.  “As the District Court held, and the United States Supreme Court precedent confirms, the terms in Section 213(a)(1) are defined functionally and cannot be swept aside by a rule that imposes a cutoff based on salary alone,” the States argued.  The State Plaintiffs explained the salary level requirement has been controversial from the date the requirement was imposed (contrary to the DOL’s assertion), but that it was set so low that there was no incentive to challenge it.  The Final Rule, however, changes that, as it will result in millions of workers no longer being covered by the exemption, even though their duties would otherwise qualify for the exemption.    “[T]he DOL is openly transforming the salary threshold into a de facto minimum wage mechanism that deliberately excludes many bona fide EAP employees from an overtime exemption,” the State Plaintiffs said.  

The case should be full briefed by the end of the month and oral argument will likely be scheduled in February.  The State Plaintiffs have asked for additional time for oral argument (30 minutes each side) in light of the complexity and importance of the issue.  The oral argument before the district court lasted 3.5 hours.

 

United States Supreme Court Agrees to Review Class Action Waiver Cases

Earlier today, the United States Supreme Court granted certiorari in National Labor Relations Board v. Murphy Oil USA, Case No. 16-307, Epic Systems Corp. v. Lewis, Case No. 16-285 and Ernst & Young LLP v. Morris, Case No. 16-300, consolidating them for argument. The three cases present the question whether class action waivers in employment arbitration agreements violate the National Labor Relations Act (“NLRA”).  The Supreme Court’s action promises the much-anticipated resolution of the circuit split on the issue.

Background

Arbitration agreements that require employees to pursue claims in arbitration rather than in court have long been enforced pursuant to the Federal Arbitration Act (“FAA”). Due to a series of Supreme Court decisions, employers increasingly have included class and collective action waivers in such agreements. However, the National Labor Relations Board (“NLRB”) has taken the position that employers violate the NLRA when they make such waivers in arbitration agreements a condition of employment.

Disagreeing with the NLRB, in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013) and Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015), the United States Court of Appeals for the Fifth Circuit generally held that class and collective action waivers do not violate the NLRA.  Since then, the Second and Eighth Circuits followed the Fifth Circuit and enforced arbitration agreements requiring employees to submit their employment claims to individual arbitration. (Click for more information on the D.R. Horton case.)

Last May, the Seventh Circuit created a circuit split in Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016), holding that arbitration agreements that prohibit employees from bringing or participating in class or collective actions violate the NLRA.  Most recently, in Morris v. Ernst & Young, No. 13-16599, 2016 U.S. App. LEXIS 15638 (9th Cir. Aug. 22, 2016), the Ninth Circuit agreed with the Seventh Circuit and the NLRB. (Click for more information on the Epic Systems Corp. case and the Ernst & Young case.)

In September 2016, the employers in Epic Systems Corp. and Ernst & Young and the NLRB in Murphy Oil each petitioned the Supreme Court to decide the issue once and for all. Reflecting the state of uncertainty on the issue, cases presenting this same question are currently before several other Courts of Appeals.

Executive Order Issued by Governor Cuomo Prohibits State Agencies From Asking Applicants About Prior Salary History to Help Ensure Pay Equity

On January 9, 2017, New York State Governor Andrew Cuomo issued an executive order aimed at ensuring pay equity. The executive order prohibits the State from asking job applicants about their current or previous compensation history until a conditional offer of employment with compensation has been extended.

Such measures have become increasingly popular in employee-friendly states and localities. Effective January 1, 2017, California employers are prohibited from relying on an employee’s prior salary to justify a disparity between the salaries of similarly situated employees. And beginning July 1, 2018, Massachusetts employers will be prohibited from screening job applicants based on their salary histories, requiring applicants to provide their salary history before receiving a formal job offer, and seeking the salary history of prospective employees from current or former employers prior to extending an offer of employment. Other jurisdictions, including Philadelphia, New York City, and New Jersey, are considering barring similar pre-hire inquiries of salary history.

New York employers should expect these types of measures to soon affect the private sector, too. Employers generally should anticipate similar legislation to spread to other employee-friendly jurisdictions.

Ohio Means Business: New Law Prohibits Cities and Counties From Enacting Paid Sick Leave, Predictive Scheduling, and Minimum Wage Laws

Imagine you operate multiple business locations in Columbus, Ohio where 3 counties comprise the city proper and as many as 11 counties comprise the larger Columbus Metropolitan Area. Now imagine that each of those counties adopts their own local ordinance requiring paid sick leave as well as advance notice (and extra pay) to employees before you can change their work schedule. Perhaps a few of the counties also enact an increased minimum wage of $15 an hour –much like the proposal to increase the minimum wage that was supposed to be voted upon in Cleveland in May of 2017. Would you want to continue to do business in Columbus or would you curtail your growth in that city and look for a more employer friendly home for your future business locations?

Many employers across the country continue to struggle with the spread of local paid sick leave, predictive scheduling, and minimum wage ordinances. In fact, Fox News ran a story last week about the challenges employers in the Village of Barrington, Illinois face by virtue of the fact that the Cook County line splits the business community in half making employers on one side of the street subject to one set of local ordinances, while businesses on the other side of the same street are subject to a different set of laws.

Fortunately for Ohio employers, Governor Kasich has recognized that this kind of patchwork of local laws is bad for business. Ohio Senate Bill 331 goes into effect on March 20, 2017. It prohibits political subdivisions of the state of Ohio from legislating or regulating the following areas of employment for private employers:

  • requiring fringe benefits for employees, defined to include leaves of absences, vacation, and separation, sick and holiday pay, as well as health, welfare, and retirement benefits;
  • whether an employer will provide advance notice of initial, new, or changes to an employee’s work schedule, including whether an employer will provide predictive schedules;
  • the amount of notice an employee receives of work schedule assignments or changes to work schedule assignments, including any addition or reduction of hours, cancellation of a shift or changes in the day or time of a shift;
  • minimization in the fluctuation of the number of hours an employee is scheduled to work daily, weekly and monthly;
  • providing additional hours to current employees before employing additional workers;
  • the number of hours an employee is required to work or be on call;
  • the time an employee is required to work or be on call;
  • the location where an employee is required to work; and
  • additional pay for reporting time when work is no longer available, being on call, or working a split shift.

The new law also prohibits cities and counties from adopting a minimum wage that exceeds that of Ohio and/ or the federal government.

Ohio definitely means business when it comes to putting a kibosh on local PSL, predictive scheduling, minimum wage, and other similar local employment laws.

Sen. Sanders, Other Members of Congress, File Amicus Brief in Support of DOL Salary Basis Regulation

Sen. Bernie Sanders, along with twenty-five other members of Congress, have filed an amicus brief in the Fifth Circuit Court of Appeals urging the Court to reverse the injunction issued by a Texas federal judge enjoining enforcement of the Department of Labor’s recent increase to the salary basis threshold for the white collar exemptions under the Fair Labor Standards Act (“FLSA”).  The amici stated that they “are committed to the right of American workers to receive fair pay for their work,” are “[w]orking to ensure that workers are provided fair wages,” and “have a strong interest in the proper interpretation and strong enforcement of the [FLSA].”  According to the amici, the “Department of Labor took a needed step toward ensuring that workers receive fair pay” and “strengthened overtime protections for millions of Americans by” increasing the salary basis threshold for the white collar exemptions.

In support of their position that the DOL did not exceed its authority by more than doubling the salary basis test, the amici argue that the concept of a salary level test as part of the white collar exemptions “is supported by the history and purpose of the FLSA and the bona fide [executive, administrative, and professional] exemption.”  The amici argue that “every iteration” of the DOL’s regulations defining the exemptions has included a salary level as a component of the exemption and that Congressional inaction since the salary level was imposed reflects agreement with a salary level test, particularly since Congress has amended the FLSA multiple times without removing the salary level test. The State Plaintiffs have explained, however, that inaction does not signal an agreement with the salary level requirement.  Rather, the salary level was never before set so high, so it did not previously exclude employees from coverage under the exemption even though their duties would qualify them for it, and there was no need for Congressional action.  The filing of the amicus brief by democratic members of Congress, coming after the announcement that President-elect Trump has named Pudzer as his nominee for Secretary of Labor, an outspoken critic of the overtime rule, injects further political theater regarding the appeal, which will be fully briefed by the end of January.

Texas AFL-CIO Files Motion to Intervene in DOL Final Rule Lawsuit, Citing Trump Administration’s Anticipated Change of Course

The Texas AFL-CIO recently filed a motion to intervene as a defendant in the action filed against the Department of Labor (DOL) regarding its highly publicized regulation expanding overtime coverage. Fearing the DOL under President-Elect Donald Trump might abandon its appeal to the Fifth Circuit of a nationwide preliminary injunction issued by a Texas District Court judge, the Texas AFL-CIO seeks to defend the Final Rule even if the DOL backs out.  The motion cites specifically an op-ed piece written by Puzder to Forbes after the Final Rule was issued where he stated the rule would “add to the extensive regulatory maze the Obama Administration has imposed on employers,” and not benefit workers.  Regardless of how the Fifth Circuit rules on the appeal or how the District Court decides the AFL-CIO’s attempt to intervene, Puzder’s criticisms of the DOL regulation and a Republican-controlled Congress could mean one of Secretary of Labor Perez’s signature regulations, for which the DOL spent more than two years developing, may be on life support.  The new Congress could simply pass legislation that would invalidate the rule and present it to President-Elect Trump.

Fifth Circuit Grants DOL’S Request For Expedited Briefing of Preliminary Injunction Ruling; Case to Be Fully Briefed by January 31, 2017

In a December 8, 2016 Order, the Fifth Circuit Court of Appeals granted the DOL’s request for expedited briefing of its appeal of the preliminary injunction issued by a district court judge that had enjoined the DOL from implementing its regulation raising the salary level for the white collar exemptions.  The Court even set a quicker briefing schedule than DOL had requested in its Motion.  The briefing schedule is as follows:

  • DOL’s opening brief is due by December 16, 2016.
  • Amicus briefs in support of the DOL are due on or before December 23, 2016.
  • Appellees’ response brief us due by January 17, 2017.
  • Amicus briefs in support of Appellees are due on or before January 24, 2017.
  • The DOL’s reply brief is due on or before January 31, 2017.

The Court further ordered that oral argument would be set for the first available sitting after the close of briefing on January 31, 2017.  Based on this schedule, the DOL’s Reply Brief is not due until after President-Elect Trump’s inauguration.  This means that in advance of this reply deadline, the DOL could withdraw its appeal. This schedule also guarantees that the new Trump Administration and/or the new Congress will at least have the opportunity to determine the fate of the salary basis increases before the Fifth Circuit issues a decision, though the timing will be tight.

DOL Requests Expedited Ruling on Appeal of Preliminary Injunction, But Appeal Will Not Be Decided Before Trump Administration Under Proposed Schedule

On December 2, one day after filing its appeal of the preliminary injunction blocking its new salary basis regulations, the DOL filed a request for expedited briefing and oral argument in the appeal.  The DOL has requested that the Fifth Circuit Court of Appeals set an expedited schedule whereby briefing would be complete on February 7, 2017 and oral argument would occur on the first available date thereafter.  According to the DOL, the injunction was issued in error because the Fair Labor Standards Act gives the DOL “broad latitude” to issue regulations defining and delimiting the white collar exemptions, including the salary basis test.  The DOL also notes in its request that the district court below set an expedited schedule for considering the motion for preliminary injunction.  The States who initially filed the lawsuit challenging the DOL salary basis regulations have indicated that they oppose the DOL’s request for expedited briefing and oral argument.  The Fifth Circuit may not grant the DOL’s request for an expedited schedule, but even if it does the appeal would not be resolved by the January 20, 2017 inauguration of President-elect Trump even under the DOL’s proposed schedule.  Under the Trump Administration, the DOL could withdraw the appeal or issue new proposed rules.  Congress could also pass new legislation nullifying the DOL regulation. 

Jackson Lewis principal Eric Magnus also contributed to this post.

DOL Appeals Preliminary Injunction Ruling to Fifth Circuit

On December 1, 2016, the Department of Labor appealed the district court’s preliminary injunction ruling.  It is expected that the DOL will request the Fifth Circuit to rule on the appeal quickly, but the Fifth Circuit may not grant this request, and the appeal may not be resolved prior to January 20, 2017.  If the appeal is not resolved prior to the Trump Administration, the appeal could be withdrawn by the new administration or legislation passed by the new Congress nullifying the DOL regulation.

 

New Pennsylvania Legislation Allows Payment of Wages by Payroll Debit Cards

Employers in Pennsylvania will be able to pay employee wages using payroll debit cards under an amendment to the banking code signed by Governor Tom Wolf on November 4, 2016. The new legislation goes into effect 180 days following the signing, on May 4, 2017.

An alternative to payment of wages by direct deposits or payroll checks, a payroll debit card is a prepaid card onto which an employer can load an employee’s wages each payday. These cards allow employers to pay employees who do not have bank accounts without requiring the employee to pay a fee to access the money. Once wages are loaded onto the cards, the cards can be used where debit cards are accepted. With most cards, employees also can withdraw the money as cash from an ATM.

Under the amendment, employers are permitted to use payroll debit cards under certain conditions. For example, payroll debit cards must be optional for employees, employers may not require employees to accept payment by payroll debit cards. Further, employers that decide to use payroll debit cards must comply with certain notice and authorization requirements proscribed by the statute.

The amendment places certain requirements on the card itself. For example, the card must allow one free withdrawal of wages each pay period and one in-network ATM withdrawal at least weekly. Employees using the card also must be able to check the card’s balance electronically or by telephone without a fee charged to the employee. In addition, the card must not impose fees for certain transactions, including issuance of the initial card and one replacement card per calendar year, transfer of wages to the card itself, and for non-use of the card for a period of less than 12 months.

Please contact Jackson Lewis for any questions about this and other workplace developments.

 

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