Fair Labor Standards Act

Catching Up with the Times: DOL Issues Final Rule Simplifying Retail Exemption Under the FLSA

As we recently reported, the DOL promulgated three new final rules regarding wage and hour issues last month. One of these rules brings a much-needed dose of clarity for certain employers on an unusually thorny issue: what exactly is a “retail or service establishment” for purposes of the “retail exemption” under Section 7(i) of the FLSA? This section exempts certain commissioned employees in “retail or service establishments” from the FLSA’s overtime compensation requirement, but the list of qualified employers has been notoriously confusing and vague. Effective May 19, 2020, the DOL’s final rule nixed its almost half-century old catalog of qualifying establishments and adopted a new and uniform framework for determining eligibility for the exemption. READ MORE

Listen Up: The DOL Begins Public Listening Sessions on Its Overtime Rule

This week, the United States Department Labor (“DOL”) is conducting its first listening session on the white collar exemptions under the Fair Labor Standards Act (“FLSA”)—more commonly known as the “overtime rule.” Several additional listening sessions will take place later this month. The sessions are expected to focus on public opinion regarding changing the current minimum salary level for exempt employees from its current level of $455 per week ($23,660 annually). There is no fee to attend a session, but registration is required here.

These sessions are just the latest in the ongoing saga over revisions to the overtime rule that began two years ago in September 2016, when twenty-two states and dozens of business groups challenged the Obama administration’s overtime regulation revisions that were finalized earlier that year. The new rule was set to implement several changes, most notably raising the minimum salary level for exempt employees to $913 per week ($47,476 annually), effective December 1, 2016. Before the new rule could take effect, the Texas federal judge hearing the case issued a nationwide injunction preventing the DOL from implementing and enforcing it, based partially on a holding that the new rule exceeded Congress’s delegation of authority to the DOL. The Obama administration appealed, and after requesting additional time to respond, the Trump administration decided to uphold the position that the DOL had the authority to revise the applicable salary level. However, in July 2017, the DOL also issued a Request for Information (“RFI”) on the overtime rule, asking for the public to submit comments by the end of September. The following month, the district court judge granted the states’ and business groups’ motions for summary judgment, invalidating the regulation. The DOL decided to dismiss its appeal and instead to pursue its own regulatory rulemaking process.

The RFI asked broad ranging questions related not only to the salary level, but to other exemption-related requirements, such as the duties test. It elicited over 140,000 public comments, including from major representative and advocacy organizations such as the United States Chamber of Commerce and Independent Sector (representing the nonprofit sector). The Chamber opposed only an “excessive increase,” suggesting that based on data from the Bureau of Labor Statistics, a more modest increase to a minimum salary of $612 per week ($31,824 annualized) was more appropriate. The Chamber also expressed its opposition to any change to the duties test. The Independent Sector highlighted the heavy financial burden the proposed increase would bring to the already-financially-strained nonprofit/charitable organizations nationwide. It suggested that any change be phased in to permit organizations time to adapt, and also expressed concern that any potential change to the duties test would “significantly impact the operations of charitable organizations,” asking that any change be considered through a formal rulemaking process allowing the public time to comment and review.

Last week’s announcement on the listening sessions offered our first glimpse into the DOL’s rulemaking process since the RFI period closed last year. Notably, the agenda questions focus exclusively on the salary test—a much narrower set of questions than those posed in the RFI. Listening Session participants are asked to focus on the four following issues: (1) “the appropriate salary level (or range of salary levels) above which the overtime exemptions for bona fide executive, administrative, or professional employees may apply”; (2) “[w]hat benefits and costs to employees and employers might accompany an increased salary level”; (3) “the best methodology to determine an updated salary level”; and (4) whether the DOL should “more regularly update the standard salary level and the total-annual-compensation level for highly compensated employees.” Noticeably absent is any indication that DOL is considering automatic inflationary updating to the salary level test. This reverts back to the position in the Bush DOL that the Department did not have statutory authority to implement automatic updating. In any event, this suggests that the DOL is shying away from changes to the duties test or other more expansive revisions as the formal rulemaking process rarely expands beyond the scope of the informal information gathering. The answer will have to wait until the Notice of Proposed Rulemaking is released, which is expected in January, at the earliest.

Auto Dealership Sells Supreme Court on Service Advisor OT Exemption

On Monday, the U.S. Supreme Court ruled that service advisers at car dealerships are exempt from the Fair Labor Standards Act (FLSA).  In Encino Motorcars v. Navarro, the majority, Chief Justice John Roberts and Justices Clarence Thomas, Anthony Kennedy, Samuel Alito, and Neil Gorsuch voted to overturn the Ninth Circuit’s ruling on this exemption a second time, deciding that service advisors are “salesm[e]n . . . primarily engaged in . . . servicing automobiles,” and thus are exempt from overtime pay.  READ MORE

Joint Responsibility: Companies Should Keep an Eye on the Shifting Legal Landscape of Joint Employment

As Congress considers a bill to change the definition of joint employment under two federal statutes, the Supreme Court is poised to decide whether to take up the issue under the Fair Labor Standards Act, the U.S. Department of Labor has withdrawn administrative guidance issued by the prior administration, and several states have enacted or considered joint employment legislation.  In this rapidly evolving legal landscape, companies may want to keep a close eye on a doctrine that can lead to unexpected legal exposure. READ MORE

President Trump Says “Not So Fast” — The Future of Overtime, Fiduciary, and Pay Reporting Rules Remains Uncertain Under the Trump Administration

On January 20, 2017, shortly after Donald Trump became the 45th President of the United States, his Chief of Staff, Reince Priebus, issued an Executive Memorandum mandating a 60-day freeze on published federal regulations that have yet to take effect to allow Trump’s appointees time to review the regulations. Although such action is fairly standard during a change of administration, the impact could be significant if certain regulations set to take effect in 2017 are delayed or ultimately replaced.  Regulations potentially affected by the 60-day freeze include the Department of Labor’s (“DOL”) overtime and fiduciary rules, and the Equal Employment Opportunity Commission’s (“EEOC”) EEO-1 pay reporting requirements. READ MORE

Will HR Managers Get Cooked? Second Circuit Says Culinary Institute’s Human Resources Director May Face Individual Liability Under FMLA

Whether a Human Resources Director will be deemed the “employer” and held individually liable for alleged violations under the Family Medical Leave Act (“FMLA”) should be left to the jury, according to the Second Circuit’s recent FMLA decision.  In Graziadio v. Culinary Institute of America, et al., 15-888-cv (2d Cir. Mar. 17, 2016), the Second Circuit found that there could be a viable claim for individual liability under the FMLA and it also announced the standard for what could be considered unlawful “interference” with FMLA rights.

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Pork Processing Plant Employees Can Keep the Bacon: Supreme Court Affirms Jury Award and Permits Proof of Wage and Hour Class Claims By Representative Evidence

While the Supreme Court in Tyson Foods, Inc. v. Bouaphakeo dashed employers’ hopes that the Court would broadly preclude statistical evidence and severely limit wage and hour class actions in a fashion similar to its restriction of discrimination class actions in Wal-mart v. Dukes, the Court was also clear that this type of evidence will not be appropriate or probative in all wage and hour claims.  In ruling for the class action claimants, the Court affirmed a $2.9 million jury award for overtime claims related to donning and doffing at an Iowa pork processing plant.  In so ruling, the Supreme Court refused to adopt the position advanced by Tyson Foods and several of its amici that class actions cannot be resolved by reliance upon representative evidence or statistical samples.  It also refused to embrace Tyson Food’s reading of Wal-mart v. Dukes as standing for the proposition that representative sample is an impermissible means of establishing class-wide liability.  But the Court also made clear whether statistical evidence could be used for liability depends on the claims asserted and the particular evidence.  While the decision is not unsurprising after oral arguments, it seems likely that employers will see an uptick in plaintiffs aggressively relying on “representative” statistical evidence in wage and hour collective and class cases.  There are, however, several “lessons learned” based upon the majority’s decision.

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DOL Continues to Push Its Agenda with New Guidance on Joint Employment

Solicitor of Labor Patricia Smith likes to quip that the Department is “working overtime on overtime.”  DOL took a break from the much-anticipated overtime regulations and issued new guidance yesterday on the question of who qualifies as a “joint employer” under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).  The guidance (Administrator’s Interpretation (AI) No. 2016-1) issued by Wage and Hour Division (WHD) Administrator Dr. David Weil, sets forth a broad (and sometimes ambiguous) reading of statutory provisions, regulations, and case law to address joint employment issues under the two statutes.  The guidance was not unexpected as some advocates have been asking for the DOL’s position on joint employment since the NLRB’s expansion of joint employment in Browning-Ferris, 362 NLRB No. 186 (Aug. 27, 2015).  Notably, the level of coordination between DOL and the NLRB on joint employment issues has been the subject of Congressional oversight and the oversight committee now claims that DOL provided suspect responses to members of Congress regarding interactions between the agencies on the issue

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Please Pass the Settlement: Second Circuit Widens Split Over Stipulated FLSA Dismissals

A recently filed petition for certiorari asks the U.S. Supreme Court to clarify the procedural requirements for ending private causes of action under the Fair Labor Standards Act (“FLSA”).  Specifically, petitioner Dorian Cheeks is asking the Supreme Court to review a decision from the U.S. Court of Appeals for the Second Circuit holding that Federal Rule of Civil Procedure 41 (“FRCP 41”) prohibits the dismissal of FLSA claims through private, stipulated settlement agreements absent approval from either a federal district court or the U.S. Department of Labor (“DOL”).

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Lawyers Entitled to Overtime Pay? Maybe So When Not “Practicing Law”

People at a Table

The Second Circuit revived an FLSA collective action filed by Michael Lola, an attorney licensed to practice law in California, who for fifteen months performed document review services for Skadden Arps, Slate, Meagher & Flom LLP (“Skadden”) though a staffing agency while living and working in North Carolina.  Lola alleged that these services did not constitute the “practice of law,” and that he was therefore eligible for overtime under the Fair Labor Standards Act.  Rejecting Lola’s arguments, a Southern District of New York judge dismissed the complaint on a Rule 12(b)(6) motion on the grounds that Lola was exempt from overtime.  However, the Second Circuit held that when accepting all of Lola’s allegations as true for purposes of a motion to dismiss, his work might not constitute the practice of law.

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