The U.S. Department of Labor (DOL) has issued its long-anticipated proposed rule to increase the minimum salary requirements for the “white collar” exemptions (executive, administrative, and professional) from minimum wage and overtime pay requirements under the Fair Labor Standards Act (FLSA).

Under the proposed rule, the salary level for the white-collar exemptions to apply will increase from the current $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year). That would be a 55% increase from the current level that became effective in January 2020 during the Trump Administration. The annual compensation level for highly compensated employees also will increase, by 34%, from the current $107,432 per year to $143,988 per year.

However, the DOL has indicated the actual salary threshold will be based on earnings data as of the date the final rule takes effect — which means that the salary floor may be even higher than the projected $55,068. That could lift the operative threshold to more than $60,000 annually.

For more on the proposed rule and anticipated legal challenges, click here.

A federal district court in Arizona held this week that courts are not required – or even authorized – to grant judicial approval of settlement agreements resolving individual claims brought under the Fair Labor Standards Act (FLSA), joining a growing number of courts calling into question the notion that private FLSA settlements require review and approval by either a court or the U.S. Department of Labor (DOL). Evans v. Centurion Managed Care of Ariz. LLC, 2023 U.S. Dist. LEXIS 139126 (D. Ariz. Aug. 9, 2023).

Background

Under Section 216(b) of the FLSA, an employee may bring a private lawsuit in an appropriate state or federal court, either on an individual or collective (class) basis, and may recover both actual and liquidated damages, as well as attorney’s fees and costs. Alternatively, under Section 216(c), “[t]he [DOL] is authorized to supervise the payment of the unpaid minimum wages or the unpaid overtime compensation owing to any employee or employees … and the agreement of any employee to accept such payment shall upon payment in full constitute a waiver by such employee of any right he may have under [Section 216(b)] of this section to such unpaid minimum wages or unpaid overtime compensation and an additional equal amount as liquidated damages.”

Following the holding of Lynn’s Food Stores, Inc. v. U.S., 679 F.2d 1350 (11th Cir. 1982), for more than 40 years the majority of federal courts, including some other courts of appeal, have concluded that FLSA claims may be settled only through approval by either the DOL or after a court of competent jurisdiction reviews and approves the settlement for fairness. See, e.g. Samake v. Thunder Lube, Inc., 24 F.4th 804 (2d Cir. 2022).

More recently, however, an increasing number of federal courts are questioning whether such judicial or DOL approval is required, or even allowed.

The Tide Appears To Be Turning

More recently, however, an increasing number of federal courts are questioning whether such judicial or DOL approval is required, or even allowed. The court in Martinez v. Bohls Bearing Equipment Co., 361 F. Supp. 2d 608 (W.D. Tex. 2005), was one of the first to hold that, because the case involved a bona fide dispute as to overtime pay due, court approval of the agreement was unnecessary. The Fifth Circuit subsequently adopted this rationale in Martin v. Spring Break ’83 Prods., LLC, 688 F.3d 247 (5th Cir. 2012), concluding that the private settlement agreement of an FLSA dispute was binding and enforceable without court approval, when “predicated on a bona fide dispute about time worked and not as a compromise of guaranteed FLSA substantive rights themselves.”

A significant number of district courts have since concurred that judicial or DOL approval is not required for bona fide disputes of individual FLSA claims. See, e.g. Walker v. Marathon Petroleum Corp., 2023 U.S. Dist. LEXIS 130671 (W.D. Pa. July 28, 2023); Jackson v. Dovenmuehle Mortg., Inc., 2023 U.S. Dist. LEXIS 113086 (E.D. Wisc. June 30, 2023); Martinez v. Back Bone Bullies Ltd., 2022 U.S. Dist. LEXIS 45870 (D. Col. Mar. 15, 2022); Alcantara v. Duran Landscaping, Inc., 2022 U.S. Dist. LEXIS 122552 (E.D. Pa. July 12, 2022); Saari v. Subzero Eng’g, 2021 U.S. Dist. LEXIS 179054 (D. Utah Sept. 17, 2021).

The Evans Decision

Evans is the most recent opinion to cast doubt on this judge-made requirement, explaining that “although the Court has previously engaged in the process of approving settlements in individual FLSA actions, it now joins the growing number of courts that have concluded that judicial approval is neither authorized nor necessary in this circumstance.” As the court observed, the text of the FLSA “strongly suggests” that Congress did not intend for a judicial approval requirement. Moreover, the court rejected policy reasons cited by some courts in favor of requiring settlement approval, finding, if anything, that policy considerations weigh against imposing a judicial hurdle to resolving an FLSA dispute. The requirement merely “slows the resolution of FLSA settlements and, by extension, the payment of wages to plaintiffs,” noted the court.

The Takeaway

Unless and until the U.S. Supreme Court weighs in, or the federal courts of appeal come to a consensus, judicial or DOL approval of individual FLSA settlements will remain a requirement in some jurisdictions. However, in some jurisdictions that is no longer the case and neither the parties nor the courts will have to undertake the time and expense of obtaining approval for settling such disputes. As the court in Evans noted, the case involved an individual settlement. The court did not hold that judicial approval was unauthorized with respect to class/collective action settlements, which still generally require court approval.

For a more in-depth look at the changing legal landscape of judicial approval of FLSA settlements, see our Special Report, Has Lynn’s Food Grown Stale? Courts Increasingly Question Obligation to Review FLSA Settlements.

If you have any questions about the Evans case, the settlement of FLSA disputes in general, or any other wage and hour question, please consult a Jackson Lewis attorney.

Recently enacted Oregon Senate Bill (SB) 184 soon will require employers to include independent contractors in their child support reporting requirements to the Oregon Division of Child Support of the Department of Justice. Currently, the reporting requirements apply only to an employer’s employees but, for all new engagements or re-engagements entered into on or after on January 1, 2024, must include any independent contractor hired by the employer as well. The new reporting requirements will apply if the employer has employees or independent contractors working only in Oregon, or is a multi-state employer and has designated to the United States Secretary of Health and Human Services that Oregon is the employer’s reporting state.

Not every independent contractor engagement or re-engagement will require reporting. For the purposes of SB 184, an independent contractor is someone who must file a federal form W-9 under the Internal Revenue Code and who is anticipated to be performing services for more than 20 days for the hiring entity. Re-engagement is defined as engaging an independent contractor that previously performed services as an independent contractor, with at least a 60-day gap between the periods during which services were performed.

The remainder of Oregon’s child support reporting requirements, set forth in ORS 25.790, are unchanged by SB 184. Employers are required to submit the report for employees (and soon for independent contractors) by mail upon hire or electronically on a monthly basis. Employers may choose to report individually or cumulatively during the reporting period and must include the employer’s name, address, and federal tax identification number, and the employee’s or independent contractor’s name, address, and social security number.

If you have any questions about Oregon’s child support reporting requirements or any other Oregon wage and hour law issue, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Reviving a security guard’s claim for overtime pay, the Eleventh Circuit Court of Appeals recently reiterated that employers may not pay employees an artificially low regular rate of pay to avoid paying the proper amount of overtime. Thompson v. Regions Sec. Servs., Inc., 67 F.4th 1301 (11th Cir. 2023). The Eleventh Circuit oversees the federal courts in Alabama, Georgia, and Florida.

Background

Plaintiff David Thompson worked as a security guard for Regions Security Services, Inc. (“Regions”). At the beginning of his employment, Thompson typically worked 40 hours per week at a rate of $13.00 per hour. However, beginning in early 2019, Regions began scheduling him for about 20 additional hours per week. For the first six to seven months of this new schedule, Regions continued to pay his regular rate of $13.00 per hour which, for the additional hours beyond 40 per week, corresponded to an overtime rate of $19.50, as required under the Fair Labor Standards Act (FLSA) (i.e., 1.5 times the regular rate for each hour worked beyond forty in a workweek).

However, in mid-July 2019, Regions inexplicably reduced Thompson’s regular hourly rate to $11.15, with a corresponding hourly overtime rate of $16.73. For the next eleven or so months, Thompson worked between 55 and 75 hours a week at this reduced hourly rate. Regions then returned him to a 40-hour per week schedule and increased his regular rate to its original $13.00 per hour.

Thompson subsequently filed suit against Regions, alleging that the reduction in his hourly rate was an attempt to avoid paying him the full amount of overtime he was due during the majority of the time his overtime hours were significantly increased, in violation of the FLSA. On motion by Regions, the district court dismissed Thompson’s lawsuit on the pleadings.

The Eleventh Circuit Decision

Thompson appealed and the Eleventh Circuit reversed. First, the Court of Appeals noted that the outcome turned on the meaning of the term “regular rate” which, under the FLSA, is the hourly rate for all non-excludable compensation that an employee receives for a 40-hour workweek. Here, arguably, Thompson had two different hourly rates – $13.00 and $11.15 – that could qualify as his regular rate.

The Eleventh Circuit then turned to the Department of Labor (DOL)’s FLSA regulations for further guidance. Most pertinently, Section 778.500 provides that an employee’s regular rate cannot “vary from week to week inversely with the length of the workweek.” Citing to an opinion from a sister circuit court, the Court of Appeals noted that an “‘agreement, practice, or device that lowers the hourly rate during statutory  overtime hours or weeks when statutory overtime is worked is expressly prohibited under’ the Department’s interpretive regulations” (quoting Brunozzi v. Cable Commns, Inc., 851 F.3d 990, 997 (9th Cir. 2017)). The Eleventh Circuit added that this prohibition prevents an employer from indiscriminately manipulating an employee’s hours and pay rate to effectively avoid paying time-and-a-half for overtime.

Here, it appeared that Thompson’s regular rate consistently remained at $13.00 per hour until, several months after he began working substantial overtime hours, the Company suddenly reduced his hourly rate with no obvious explanation. Although Regions asserted that it changed Thompson’s regular rate to accommodate his requested scheduling modifications, Thompson plausibly had suggested that instead the Company did so to avoid paying as much overtime during the eleven-month period when he worked significant overtime hours. Because a district court, when reviewing a motion for judgment on the pleadings, must accept the facts alleged in the complaint as true and view them in the light most favorable to the plaintiff, an issue of material fact remained as to the real reason for the reduction in Thompson’s hourly rate. Thus, the grant of dismissal was reversed and the case remanded.

The Takeaway

As the Eleventh Circuit’s decision highlights, an employer may not artificially manipulate an employee’s regular rate in an effort to reduce or eliminate overtime pay, without running afoul of the FLSA (or comparable state law).

If you have any questions about this decision or any other wage and hour questions, please contact a Jackson Lewis attorney.

In 2018, the Michigan legislature adopted, and then within the same legislative session amended, two voter-approved ballot initiatives, one to significantly raised Michigan’s minimum wage and the other to expand employer obligations to provide paid sick leave. In 2022, the Michigan Court of Claims held that the legislature’s actions violated the Michigan Constitution and ordered reinstatement of the ballot initiatives as originally presented.

However, in January 2023, prior to the ordered reinstatement date, the Michigan Court of Appeals reversed that decision, concluding that the legislature did in fact possess such authority. The Michigan Supreme Court has now agreed to hear the matter and decide which version of the law is valid and, in doing so, whether the legislature has the authority under the Michigan Constitution to adopt and amend voter-approved ballot initiatives within the same legislative session. Mothering Justice et al. v. Attorney General and State of Michigan, Appeal No. 165325 (Mich. June 21, 2023).

Background

In the summer of 2018, the Michigan legislature was presented with two ballot initiatives, one to increase the minimum wage and the other to require employers to provide paid sick leave to their employees. Under the Michigan Constitution as interpreted and applied for many decades prior, the legislature had three options for each initiative:

(1) Reject the initiative, in which case it would be placed on the November 2018 ballot for the voters to either approve or disapprove;

(2) Adopt and enact it without any modifications; or

(3) Propose an alternative, which would then be placed on the ballot alongside the initiative, with the option receiving the most votes becoming law.

Instead, the legislature enacted both initiatives and then immediately amended them, revising key provisions in the process. In so doing, the legislature eliminated the ability of the voters to decide on either the original ballot initiatives or the amended versions passed by the legislature. In July 2022, the court of claims held that the legislature’s actions violated the Michigan Constitution. As result, the court voided the amended laws adopted by the legislature and ordered reinstatement of the ballot initiatives as originally presented. (For further details on the events leading to the court of claims decision and the decision itself, see our articles, Michigan Court Voids State’s Minimum Wage and Paid Medical Leave Acts, Creating Compliance Limbo; Order Issuing Changes to Michigan Minimum Wage and Paid Sick Leave Law Stayed Until February 2023; and Michigan Minimum Wage and Paid Leave Update: Agency Guidance and the Mothering Justice Appeal.)

In anticipation of an appeal, the court of claims issued a temporary stay of the reinstatement. In January 2023, prior to the expiration of the stay, the Michigan Court of Appeals reversed the decision of the court of claims, holding that the legislature was within its authority to amend the 2018 ballot initiatives. (For further details of that decision, see our article, (Mothering) Justice Denied: Legislative Amendments to Minimum Wage and Paid Sick Leave Upheld).

The Michigan Supreme Court has now granted plaintiff Mothering Justice’s application for leave to appeal the decision of the Court of Appeals. The Supreme Court’s grant orders the parties to address (1) whether the legislature violated Article 2, Section 9 of the Michigan Constitution when it enacted the voter initiatives into law and then amended those laws in the same legislative session, and (2) if so, whether the voter initiatives remain in effect. A number of third parties already have filed amicus briefs and the Supreme Court’s order allows for additional parties to request filing of such briefs.

The Takeaway

As long as Michigan employers are in compliance with the current versions of Michigan’s minimum wage laws and Paid Medical Leave Act (PMLA), no further action is required unless and until the Michigan Supreme Court rules otherwise. Thus, for now the minimum wage remains at $10.10 per hour and the tipped employee minimum wage remains at $3.84 per hour. Similarly, under the current paid sick leave law, employers with more than fifty (50) employees must provide eligible employees with a maximum of 40 hours of paid sick time, with such employees accruing one hour of sick leave for every 35 hours worked.

Jackson Lewis attorneys will continue to monitor and report on related developments. In the meantime, please contact a Jackson Lewis attorney if you have any questions.

According to the latest report from the U.S Department of Labor (DOL) regarding its regulatory agenda, released this week, the DOL has now set the publication of the new proposed Overtime Rule for August 2023. However, given the current status of the President’s nominees for both the Secretary of Labor and the Wage and Hour Division (WHD) Administrator, further pushback of this date certainly seems possible.

More than two years ago, in testimony before the House Education and Labor Committee, then Secretary of Labor Marty Walsh stated that the current minimum salary necessary to qualify for the Executive, Professional, and Administrative exemptions from overtime – a.k.a. the “white collar” exemptions – under the Fair Labor Standards Act (FLSA) was “definitely too low.” Since the beginning of 2020, that annual salary level has been $35,568 ($684 per week), while the minimum annual salary required to satisfy the “Highly Compensated Employee” (HCE) exemption is $107,432.

In the Fall of 2021, the DOL first formally listed the publication of a new Overtime Final Rule in its regulatory agenda. The WHD then spent several months holding virtual “town halls” with employees and employers to gather initial input for the anticipated rule, with an expected publication date of Spring 2022 for its Notice of Proposed Rulemaking (NPRM).

And then we waited. And waited, as the expected release date of the proposed rule continued to be pushed back, undoubtedly due in part because the Senate has confirmed neither Julie Su, President Biden’s nominee to replace Walsh as Secretary of Labor, nor Jessica Looman, his nominee to lead the WHD. DOL also may be waiting for a ruling on pending summary judgment motions in a lawsuit challenging the Department’s authority to make the prior increase. See our Special Report, Fifth Circuit Reverses Denial of Preliminary Injunction to Invalidate DOL Tipped Dual Jobs Rule.

So the wait continues. 

Jackson Lewis will continue to monitor and report any updates on this development. If you have any questions about the current overtime regulations or any other wage and hour question, please contact the Jackson Lewis attorney(s) with whom you regularly work.

A named plaintiff who files a collective action for overtime pay under the Fair Labor Standards Act (FLSA), and whose individual claims are dismissed without prejudice because the district court lacks jurisdiction over the plaintiff’s former employer, is not entitled to tolling of the statute of limitations of those claims. Therefore, when the plaintiff subsequently refiled those claims in the proper district court after the maximum limitations period had expired, those claims were rightly dismissed with prejudice by the second court. Wright v. Waste Pro USA, Inc., 2023 U.S. App. LEXIS 14692 (11th Cir. June 13, 2023).

The Eleventh Circuit has jurisdiction over the federal courts in Alabama, Florida, and Georgia.

Background

Plaintiff Anthony Wright worked as a driver for Waste Pro Florida, a subsidiary of parent company Waste Pro USA, from September 2014 to November 2015. In October 2017, he and two other drivers filed both individual claims and a putative collective action in the U.S. District Court for South Carolina, against the parent company and several of its subsidiaries under the FLSA, claiming violations of the Act’s overtime provisions.

In December 2017, the parent company and Waste Pro Florida moved to dismiss Wright’s claims against them, on the basis that the South Carolina court lacked personal jurisdiction over them. In July 2019, the district court granted the defendants’ motions and dismissed Wright’s individual claims without prejudice.

In August 2019, Wright refiled his claims in the U.S. District for the Southern District of Florida. However, because the FLSA provides for a two-year statute of limitations, or at most a three-year limitations period for “willful” claims, and because Wright last worked for Waste Pro in November 2015, the parties agreed that all of Wright’s claims would be untimely unless the Florida court concluded that the limitations period was tolled. The Florida court concluded that his claims were not tolled during the pendency of his claims in South Carolina and further that no basis existed for equitable tolling of the limitations period on his claims. Therefore, the court dismissed his claims with prejudice.

The Eleventh Circuit Decision

Wright appealed and the Eleventh Circuit affirmed the dismissal. As to Wright’s first argument, the Court of Appeals held that his claims were not tolled during the pendency of the South Carolina case because that case and his subsequent lawsuit in Florida were separate cases. “For purposes of a limitations period, an action that is dismissed without prejudice is ordinarily treated as never filed,” noted the Eleventh Circuit, and “[s]uits under the [FLSA] are not an exception to that rule.” Therefore, Wright was obligated to file his claims in Florida within the maximum three-year limitations period if they were to have a chance of survival. The court of appeals distinguished Wright, as a named plaintiff in the South Carolina lawsuit, from those who joined the lawsuit only as “opt-ins” to the collective action.

As to equitable tolling, that extraordinary remedy potentially might have been available only if Wright had no adequate remedy at law. Here, however, Wright had two such legal options: He could have filed a “placeholder” complaint in Florida to preserve his claims during the limitations period while the South Carolina case proceeded, or he could have filed an appeal of the South Carolina court’s dismissal order. He did neither. Thus, his claims were properly dismissed.

If you have any questions about this case or any other wage and hour question, please consult the Jackson Lewis attorney(s) with whom you regularly work.

In a June 9, 2023 filing with the U.S. Court of Appeals for the Fifth Circuit, the U.S. Department of Labor (DOL) stated that its Independent Contractor (IC) Final Rule, addressing the standard for determining whether a worker is an employee or “independent contractor” under the Fair Labor Standards Act (FLSA), will not be ready for publication until October 2023, five months later than the Department previously had asserted.

A Notice of Proposed Rulemaking (NPRM) for the new IC rule was issued in October 2022, following a March 2022 decision by a Texas federal court that the DOL’s actions were unlawful in delaying and withdrawing an IC final rule issued during the waning days of the Trump administration (the “Trump IC Rule”). As a result of the court’s ruling, the Trump IC Rule went into effect, retroactive to its intended effective date in March 2021. The DOL appealed that ruling to the Fifth Circuit, but subsequently asked the Court of Appeals to stay proceedings while it went through the formal process of both withdrawing the Trump IC Rule and issuing a new IC Final Rule.

For a full discussion of the NPRM and the history of the independent contractor analysis under the FLSA, see our article, What’s Old is New Again: Labor Department Flip-Flops on Independent Contractor Analysis.

Jackson Lewis will continue to keep you updated on further developments. In the meantime, if you have any questions about the proposed rule, the independent contractor analysis, or any other wage and hour issue, please consult the Jackson Lewis attorney(s) with whom you regularly work.

By an 11-10 vote, Labor Secretary nominee Julie Su barely garnered the approval of the Senate Committee on Health, Education, Labor, and Pensions, but her chances of success before the full Senate remain unknown.

Recently, we reported that a number of Republican members of the Committee had questioned whether she was qualified for the position. During questioning by the Committee, Su plainly stated that she has no intention of advocating for the employee-friendly “ABC” test for determining independent contractor status. Nevertheless, her time as California’s Labor Secretary – where she enforced such a test – has some Republican Senators and business owners concerned. Notably, neither Senator Joe Manchin (D-WV) nor former Democratic Senator Kyrsten Sinema (I-NV) have declared whether they will support Su’s nomination, and failure to obtain their votes will hamper her chances of approval.

Su now waits alongside Jessica Looman, Biden’s nominee as head of the Wage and Hour Division of the DOL, for the full Senate to vote on her nomination. In the meantime, if you have any questions about this development or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.

Labor Secretary nominee Julie Su continues to face close scrutiny by Republican members of the Senate Committee on Health, Education, Labor, and Pensions, at least some of whom believe she is not qualified for the position. Notably, however, during the Committee hearing on her nomination, Su plainly stated that , in her view, the DOL has no intention of seeking to implement the “ABC” test for determining independent contractor status, or of issuing a new joint employer rule.

The “ABC” test currently is used by a handful of states, most notably California, to determine whether an individual is properly classified as an employee or an independent contractor, and is a considerably stricter test for establishing independent contractor status than that currently applied under the FLSA. During the Committee hearings, Su noted that any change to the independent contractor analysis currently adopted by the DOL would require Congress to implement. Notably, the DOL issued a Notice of Proposed Rulemaking in 2022 to both withdraw a Trump-era Final Rule regarding the independent contractor analysis and to publish a new rule. The proposed rule, which has yet to be finalized, would return to the multi-factor analysis used by the Department for decades and which, in some variation or another, has been used by the federal courts throughout that time.

Similarly, Su testified that currently the DOL has no intention of issuing a new joint employer rule. The DOL likewise withdrew a Trump-era rule on the issue (subsequently vacated in large part by a New York federal court) and Su stated that the analysis is “fact-specific test” that will continue to “stand [ ] based on case law that has been developed over several decades.”

In addition to the pending nomination of Su as Secretary of Labor, Biden’s nominee for the head of the DOL’s Wage and Hour Division, Jessica Looman, remains to be confirmed by the full Senate, having been favorably reported out of the Committee.

Jackson Lewis will continue to monitor and report any updates on these DOL developments. In the meantime, if you have any questions about these or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.