UPDATED: Oral Argument on Overtime Rule Appeal Scheduled for October 3rd

The Fifth Circuit Court of Appeals has set oral argument for October 3rd (revised 8/30/2017) on the Obama-era overtime pay rule that has been blocked from government enforcement by a federal district court in Texas since last November.  The DOL under the Trump administration already has backed away from the government’s previous position, asserting in its appellate brief that it will not continue to advocate for the salary level set forth in the final rule but instead will undertake further rulemaking to determine what the proper salary level should be.  To that end, in late July the DOL issued a public request for information in anticipation of new rulemaking setting forth a lower salary level.  The DOL continues to argue on appeal, however, that it has the statutory authority to establish a salary level test, contrary to the conclusion of the district court.   It will be interesting to see how the DOL asks the Court to confirm its authority to set a salary level and reverse the district court on that point, but at the same time, not revive the Obama Final Rule that the DOL is now on a path to replace.

Notably, oral argument before the Supreme Court is set one day earlier in NLRB v. Murphy Oil USA and consolidated cases, to address the validity of class and collective action waivers in employment arbitration agreements.  The Court’s holding no doubt will have a significant impact on wage and hour class and collective actions going forward and is another matter in which the new administration has parted ways from its predecessor, the Department of Justice recently asserting in its brief to the Court that such waiver provisions are valid and enforceable.  So, the week of October 2nd is shaping up to be a big day for employers.

Department Of Labor To Rescind 2011 Tip Pooling Regulation

Today the Trump Administration, through the Office of Management and Budget’s Office of Information and Regulatory Affairs, released the federal government’s semi-annual Unified Agenda of Regulatory and Deregulatory Actions. This agenda provides public notice of the regulatory actions the various agencies of the Executive Branch anticipate taking in the coming year. Among the items listed for the Department of Labor is a matter for the Department’s Wage and Hour Division entitled “Tip Regulations Under the Fair Labor Standards Act (FLSA),” Regulation Identifier Number 1235-AA21. The agenda notes that current “regulations limit an employer’s ability to use an employee’s tips regardless of whether the employer takes a tip credit under Section 3(m) [of the FLSA] or instead pays the full FLSA minimum wage directly to the employee” and that “the Department will propose to rescind the current restrictions on tip pooling by employers that pay tipped employees the full minimum wage directly.” The agenda contemplates issuing a Notice of Proposed Rulemaking in August 2017.

The rule under consideration would reverse a controversial position taken during the Obama Administration in 2011 when, in response to a federal appellate court decision concluding that the FLSA imposes no restrictions on tip pools where employers pay full minimum wage, the Department issued regulations expressly limiting the use of tip pools even when employers pay the full minimum wage to all employees. See Updating Regulations Issued Under the Fair Labor Standards Act, 76 Fed. Reg. 18,832 (Apr. 5, 2011). That ruling has spawned a number of lawsuits and is currently before the Supreme Court in two certiorari petitions, Nos. 16-163 and 16-920. The Department’s decision to rescind the regulation appears to reflect a recognition that the position taken in the prior administration is vulnerable to legal challenge, as well as a broader concern that if the Supreme Court takes the case up it could lead to a significant reining in of the authority of Executive Branch agencies to issue regulations in the absence of clear statutory permission to do so. The government’s brief in No. 16-920 is currently due on September 8, 2017.

DOL Opinion Letters Are Back

The U.S. Department of Labor announced today that it will reinstate the Department’s long-standing practice of issuing opinion letters to employers and employees regarding application of the Fair Labor Standards Act.   The Obama Administration eliminated opinion letters in favor of broader “Administrator Interpretations,” but those were few and far between.   “The letters were a division practice for more than 70 years until being stopped and replaced by general guidance in 2010,” the DOL release said.  Opinion letters address specific, and often nuanced questions, regarding application of the FLSA and its implementing regulations.  They provide guidance to employers, who, under the FLSA can rely on the guidance in structuring operations and compensation.  And if the employer relies on the opinion letter, even if a court later decides the DOL opinion letter does not accurately apply the law, the employer may be able to avoid liability under the “good faith” defense established by the FLSA.  “Reinstating opinion letters will benefit employees and employers as they provide a means by which both can develop a clearer understanding of the Fair Labor Standards Act and other statutes,” said Secretary Acosta.  At the beginning of the Obama administration, the DOL withdrew, for further consideration, several opinion letters that had been prepared by the Bush Administration, but not mailed prior to inauguration.  During the following eight years of the Obama Administration, however, the DOL did not take any further action with respect to those opinion letters.   It is possible that some of these opinion letters may be reinstated.

DOL Withdraws Joint Employer and Independent Contractor Administrator’s Interpretations

U.S. Secretary of Labor Alexander Acosta announced on June 7, 2017, the immediate withdrawal of two Wage and Hour Division Administrator’s Interpretations (“AIs”) on joint employment and independent contractor status issued by the Obama administration.

Administrator’s Interpretation No. 2016-01, issued in January 2016, addressed joint employment under the Fair Labor Standards Act (“FLSA”) and Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”) and Administrator’s Interpretation No. 2015-1, issued in July 2015, addressed the definition of independent contractors under the FLSA. The AI regarding joint employment was viewed as an attempt to expand the definition of joint employment and the AI defining independent contractor status as narrowing those classified as independent contractors.

DOL made clear that removal of the two AIs “does not change the legal responsibilities of employers under the Fair Labor Standards Act or Migrant Seasonal Agricultural Worker Protection Act, as reflected in the Department’s long-standing regulations and case law.” But the withdrawal of these two AIs likely signals a policy shift in how DOL will interpret and seek to enforce matters relating to joint employment and independent contractor.

Acosta also signaled during his confirmation hearing that he may re-implement the agency’s practice of issuing opinion letters and, if this practice is reinstated, it is possible DOL may issue opinion letters further addressing joint employment and independent contractor issues.

New York State Department of Labor Appeals Decision Invalidating Regulations Governing Payroll Debits Cards and Direct Deposit

The New York State Department of Labor (NYSDOL) has appealed the Industrial Board of Appeals decision that invalidated and revoked final regulations issued by the NYSDOL which would have significantly restricted the use of payroll debit cards and imposed new disclosure and consent requirements for direct deposit.  The regulations (12 NYCRR §192) were to become effective on March 7, 2017, had the Industrial Board of Appeals not invalidated them.  Further discussion regarding the proposed rules can be found here.

Georgia Law Endorses ‘On Call Scheduling’ Practice

Georgia’s governor recently signed into law a measure protecting Georgia employers from those pesky local laws seeking to regulate wages and hours.  The State already prohibits localities from enacting more favorable minimum wage and overtime laws than State law, but now Georgia’s tradition of promoting an employer-friendly environment, particularly for retail businesses and restaurants, has preemptively barred local wage laws regulating  how employers schedule employees. The law is aimed at preventing local laws that, for example, require compensation for on-call employees whose shifts are canceled on short notice.  Learn more here.

Appeal of DOL Final Overtime Rule Won’t Be Heard Until At Least The Summer

The Fifth Circuit granted the government’s request for additional time to file its final reply brief in the pending appeal of a nationwide injunction issued by a Texas District Court Judge, blocking the DOL’s controversial overtime rule raising the required salary level for the white collar exemptions.  The final reply brief will not be filed until June 30, 2017, with oral argument likely scheduled sometime in the summer, unless additional requests for an extension are made.  The final brief was due on May 1, 2017, but the government requested an additional 60 days so the new administration could evaluate the case.  The government, prior to the election, had asked for expedited briefing, but now has made three requests to delay a ruling so the Trump administration can weigh in.  The additional 60 days will provide Alexander Acosta, who is expected to be confirmed as Secretary of Labor, time to determine what position he will take on the Obama overtime rule.  It will be one of the first major decisions the new Secretary of Labor will need to make.      

 

Government Seeks Another Delay on DOL’s Overtime Rule

The government has asked for another delay in submitting its final brief to the Fifth Circuit Court of Appeals regarding the DOL’s Final overtime rule, which raised the salary level for the white collar exemptions from $23,660 to $47,476.  The final reply brief was scheduled to be filed on May 1, 2017, after two earlier requests for an extension.  Now the government has asked for an additional 60 days, until June 30, 2017, to file the reply brief.  The motion notes the request is necessary “to allow incoming leadership personnel adequate time to consider the issues” and explains that the Secretary of Labor has yet to be confirmed.  It is expected the Fifth Circuit will grant the request, which was unopposed.  A vote on the Secretary of Labor nominee, Alexander Acosta, may be scheduled next week.  Once the Secretary is confirmed, the government will need to stake out its position regarding the Final Rule.  Please watch for developments here.

 

Federal Court In Illinois Rules Online Retailer Of Event Tickets Qualifies As “Retail Establishment” Under Section 207(i) Of The FLSA, Refusing to Defer to DOL Regulations

An online ticket broker that sells tickets to concerts, sporting events, and the theater qualifies as a “retail or service establishment” under Section 207(i) of the Fair Labor Standards Act (“FLSA”), Judge John Lee of the United States District Court for the Northern District of Illinois held. Blahnik v. Box Office Ticket Sales, LLC, 2017 U.S. Dist. LEXIS 45158 (N.D. Ill. Mar. 28, 2017).

Plaintiffs were sales representatives employed by Box Office Ticket Sales, LLC (“BOTS”) who alleged they were denied overtime pay. BOTS and the other defendants argued that the plaintiffs were not entitled to additional overtime wages under the FLSA since they qualified as commissioned employees of retail or service establishment under 29 U.S.C. § 207(i) of the FLSA.  For Section 207(i) to apply, three requirements must be met: (1) the employee must be employed by “a retail or service establishment;” (2) the employee’s regular rate of pay must exceed one and one half times the minimum wage; and (3) more than half of the employee’s compensation must come from commissions on goods or services sold.  29 U.S.C. § 207(i).  The only requirement at issue in Blahnik was the first requirement.

The court granted BOTS motion for summary judgment and held it qualified as a “retail or service establishment,” and in so doing, expressly addressed and rejected a regulation issued by the United Stated Department of Labor (“DOL”). The DOL regulation purportedly identifies establishments lacking a retail concept, 29 C.F.R. § 778.317, and lists travel agencies as one of the establishments lacking a retail concept.  Plaintiffs had argued that because BOTS was akin to a travel agency, the regulation precluded application of Section 207(i) to BOTS. But Judge Lee rejected the plaintiff’s reliance on the DOL regulation, noting that the Seventh Circuit Court of Appeals had previously found the list in the regulation to be “an incomplete, arbitrary, and essentially mindless catalog.” Other courts have also ignored the list, finding it arbitrary.

The court found BOTS acted as a retailer in selling tickets to customers (not a wholesaler) and thus qualified as a retail establishment notwithstanding the list of establishments in the DOL regulation.

This decision highlights that § 207(i) can apply to online retailers—a method of selling that did not exist when 7(i) was enacted. It remains important, as always, to confirm compliance with state law before implementing any wage-and-hour practice, whether relating to commission salespersons or otherwise.

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