Wage and Hour Defense Blog

Wage and Hour Defense Blog

Supreme Court Set To Resolve Class Action Waiver Dispute

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Supreme Court Set To Resolve Class Action Waiver DisputeOn January 13, 2017, the United States Supreme Court granted certiorari to hear three cases involving the enforceability of arbitration agreements that contain class action waivers.

Whether such agreements are enforceable has been a hotly contested issue for several years now, particularly in cases involving wage-hour disputes.

The Fifth Circuit has held that such waivers can be enforceable (NLRB v. Murphy Oil, Inc.), joining the Second and Eighth Circuits in that conclusion. The Seventh (Epic Systems, Inc. v. Lewis) and Ninth Circuits (Ernst & Young LLP v. Morris) have held that they are not, determining that they violate employees’ rights to engage in collective activities under the National Labor Relations Act.

Barring the failure to confirm a new Supreme Court Justice to fill the vacant seat before the cases are argued — which could well result in a 4-4 tie — the Supreme Court’s decision to hear the Murphy Oil, Epic Systems and Ernst & Young cases would seem likely to resolve the current dispute between the Circuits regarding the enforceability of those waivers. And it would provide some much-needed guidance to employers across the country.

Whether a ninth Supreme Court Justice will be seated in time to hear the cases is questionable, though. It is possible that the case could be held over until the next term, when a full Court presumably will be seated. If that does not occur, and if a 4-4 tie resulted, the split among the Circuits would remain.

Of course, there are many cases across the country in which parties are currently debating whether class action waivers are enforceable. One would think that most, if not all, of those cases will now be stayed while the courts await the Supreme Court’s ruling.

Despite Expedited Fifth Circuit Review, the District Court Case Challenging the DOL’s Proposed Overtime Regulations Will Proceed

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The District Court for the Eastern District of Texas has denied the U.S. Department of Labor’s application to stay the case in which the district court enjoined the DOL’s new overtime regulations. The DOL had asked the court for a stay while the Fifth Circuit Court of Appeals considered an interlocutory appeal of the injunction.

As wage and hour practitioners know:

  • In May 2016, the U.S. Department of Labor announced that it would implement new regulations increasing the salary threshold for the executive, administrative, and professional overtime exemptions to $47,476 ($913 per week);
  • In September 2016, a group of 21 states filed a Complaint in the Eastern District of Texas challenging the new regulations. A similar lawsuit was filed in the same court by several private industry groups, and those plaintiffs moved for summary judgment; and
  • In November 2016, the district court issued a nationwide preliminary injunction against the new regulations. The district court made a preliminary conclusion that, because the FLSA did not reference any salary thresholds, the DOL had exceeded its authority.

The Fifth Circuit Court of Appeals granted the DOL’s application for interlocutory review, and ordered that briefing be concluded by January 31, 2017.

The DOL then sought a stay of the proceedings before the district court.

In denying the DOL’s motion, the district court stated that the decision to grant or deny a discretionary stay pending an interlocutory appeal depends on: (1) whether the application is likely to succeed on the merits; (2) whether the applicant will be irreparably injured without a stay; (3) whether a stay will substantially injure other parties; and (4) where the public interest lies.

The district court stated that the DOL’s application argued only that the outcome of the case “will likely be controlled in large part by the Fifth Circuit’s decision on appeal.” Because the DOL did not “present a substantial case on the merits,” its application for a stay was denied.

Accordingly, the proceedings before the Fifth Circuit and the district court will proceed concurrently. We will continue to monitor each of these matters, and share any significant developments.

New York Raises Salary Thresholds for Overtime Exemption – Employment Law This Week

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Featured on Employment Law This Week:  Another Department of Labor action currently in limbo is the new federal salary thresholds for the overtime exemption. But New York went ahead with its own increased thresholds, sealing the deal at the end of 2016.

In New York City, the threshold is now $825 a week, or $42,950 annually, for an executive or administrative worker at a company with 11 or more employees. The salary thresholds will increase each year, topping out at $1,125 per week in New York City and in Nassau, Suffolk, and Westchester counties.

Watch the segment below and see our colleagues’ advisory.

New York State Department of Labor Implements New Salary Basis Thresholds for Exempt Employees

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Our colleagues, Susan Gross Sholinsky, Dean L. Silverberg, Jeffrey M. Landes, Jeffrey H. Ruzal, Nancy L. Gunzenhauser, and Marc-Joseph Gansah have written an Act Now Advisory that will be of interest to many of our readers: “New York State Department of Labor Implements New Salary Basis Thresholds for Exempt Employees.

Following is an excerpt:

The New York State Department of Labor (“NYSDOL”) has adopted its previously proposed amendments to the state’s minimum wage orders to increase the salary basis threshold for executive and administrative employees (“Amendments”). The final version of the Amendments contains no changes from the proposals set forth by the NYSDOL on October 19, 2016. The Amendments become effective in only three days—on December 31, 2016.

While the status of the new salary basis threshold for exempt employees pursuant to the Fair Labor Standards Act (“FLSA”) is still unclear following the nationwide preliminary injunction enjoining the U.S. Department of Labor (“USDOL”) from implementing its new regulations,this state-wide change requires immediate action for employers that did not increase exempt employees’ salaries or convert employees to non-exempt positions in light of the proposed federal overtime rule.

Read the full post here.

Top Issues of 2016 – Featured in Employment Law This Week

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The new episode of Employment Law This Week offers a year-end roundup of the biggest employment, workforce, and management issues in 2016:

  • Impact of the Defend Trade Secrets Act
  • States Called to Ban Non-Compete Agreements
  • Paid Sick Leave Laws Expand
  • Transgender Employment Law
  • Uncertainty Over the DOL’s Overtime Rule and Salary Thresholds
  • NLRB Addresses Joint Employment
  • NLRB Rules on Union Organizing

Watch the episode below and read EBG’s Take 5 newsletter, “Top Five Employment, Labor & Workforce Management Issues of 2016.”

Seventh Circuit Holds That Student Athletes Are Not Employees

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Berger v. National Collegiate Athletic Association,
No. 14-cv-1710 (7th Cir. Dec. 5, 2016)

Colleges and universities, at least in the jurisdiction of the Seventh Circuit Court of Appeals, surely breathed a collective sigh of relief earlier this month when the Court held that student athletes were not employees under the Fair Labor Standards Act (“FLSA”) and thus were not entitled to minimum wage.

Former student athletes at the University of Pennsylvania sued Penn, the National Collegiate Athletic Association (“NCAA”) and over 120 other colleges and universities that have Division I (the division that covers the largest schools) athletic programs, arguing that student athletes were employees entitled to the minimum wage. Interestingly, the court declined to use any of the multi-factor tests to resolve the issue because those tests would not capture the true nature of the relationship.

Instead, the court relied on the U.S. Department of Labor’s Field Operations Handbook, which indicates that students who participate in extracurricular activities are not employees of the school. In addition, the court took a common sense approach and recognized that college athletes participate in these programs for reasons wholly unrelated to immediate compensation and without any expectation of earning an income. Viewing student athletes as employees also would undermine what the court recognized as a “revered tradition of amateurism in college sports.”

Thus, the Seventh Circuit has added one more nail to the coffin of student athletes as employees. While some may argue that large colleges and universities should share some of the significant income they receive from football and other well attended games with the student athletes, that could signal a slide down a slippery slope. If student athletes were considered employees, what about student actors, orchestra members and any other students involved in extracurricular activities where performances mandate an admission fee? And in the last analysis, students receive a variety of non-economic benefits that distinguish these activities from “employment” within the meaning of the FLSA.

DOL Appeals Temporary Injunction on Overtime Laws – Employment Law This Week

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Featured on Employment Law This Week: A Texas federal court ruled that the U.S. Department of Labor (DOL) does not have the authority to implement new salary thresholds for overtime.

The district judge issued a nationwide preliminary injunction on the DOL’s new rules and the department appealed. The DOL has now asked for an expedited briefing on its appeal to be completed by February 7, followed by oral arguments as soon as possible. But the Trump administration will be in place by then, and that could change the DOL’s position.

Watch the segment below and read our recent post.

California Court of Appeal Upholds On-Duty Meal Period Agreements for Concrete-Mixer Drivers

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On November 30, 2016, the California Court of Appeal issued its opinion in Driscoll v. Granite Rock Company. The opinion provides guidance to California employers who enter into on-duty meal period agreements with their employees.

In Driscoll, the trial court had certified a class of approximately 200 concrete-mixer drivers who alleged they were not provided off-duty meal periods pursuant to California law. Those claims proceeded to a bench trial and the trial court found in favor of the employer. The employees then appealed.

The Court of Appeal upheld the employer’s on-duty meal period agreements, noting that the employer’s “policies regarding meal periods [we]re particularly appropriate in the context of the ready mix concrete industry.” The Court of Appeal cited the 2012 decision in Brinker, where the California Supreme Court held that “[w]hat [off-duty meal practices that] will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law.” Relying on Brinker, the Driscoll Court concluded that “the issue of different industry practices is a factual determination. Here, while on the job, mixer drivers manage a rolling drum of freshly batched concrete at any given time throughout their work day. When a driver is able to take a duty-free lunch period is dependent on the state of the concrete in his or her truck, and the nature of the construction job to which the driver is attending.”

The Court of Appeal also rejected the employees’ arguments that the employer required employees to enter into on-duty meal period agreements. The trial court had “found that when a concrete-mixer driver requested to have an off-duty meal period, Graniterock granted that request, and relinquished all control of the employee for the 30-minute off-duty period.” The Court of Appeal concluded that doing so satisfied the Brinker standard.

The Driscoll decision is a welcome one for employers – especially those facing class actions – that use on-duty meal period agreements as it reaffirms their validity.

Department of Labor Appeals Texas Order Enjoining Enforcement of New Overtime Rules

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Overtime Clock Faces - Abstract PhotoWe have written more than a few times here about the new Fair Labor Standards Act (“FLSA”) overtime rules that were scheduled to go into effect on December 1, 2016, dramatically increasing the salary threshold for white collar exemptions.

Most recently, we wrote about the November 22, 2016 nationwide injunction entered by a federal judge in Texas, enjoining the Department of Labor (“DOL”) from enforcing those new rules on the grounds that the DOL had overstepped its bounds.

The injunction threw the new rules into a state of limbo, as employers and employees alike were left to wonder whether the DOL would appeal that decision to the Fifth Circuit Court of Appeals.

Under normal circumstances, one would assume that the DOL would appeal that ruling.  However, normal circumstances do not exist.  With a new President set to be sworn in shortly, and with a new Secretary of Labor presumably to be appointed thereafter, there was much speculation about what the DOL would do.

The question has now been answered – at least for the short term.

On December 1, 2016 – perhaps not coincidentally, the same day the rules were to go into effect – the Department of Justice (“DOJ”) filed an appeal on behalf of the DOL. 

The DOL has issued a brief statement about its position, which may be found here: https://www.dol.gov/whd/overtime/final2016/litigation.htm

In short, it is the DOL’s position that the salary basis test has been part of the FLSA overtime rules since 1940, and that the new rules were the result of a comprehensive rule-making process that complied with the law.

While the notice of appeal has been filed, it remains difficult to predict whether or how long the appeal will in fact proceed.  Unless the President-elect should indicate otherwise, it is certainly possible that the new Secretary of Labor will pull the plug on the appeal shortly after he or she assumes the role.

We will continue to monitor the case and share any significant developments. In the meantime, it would appear safe to say that employers should feel comfortable that they need not comply with the new rules, and that those who already implemented or announced changes prior to the injunction should seek guidance on how best to proceed if they intend to rescind those changes.

Adjusting Wage Rates? Be Mindful of State Notice Requirements

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Even employers who were opposed to the new overtime regulations are in a quandary after the District Court for the Eastern District of Texas enjoined the Department of Labor from implementing new salary thresholds for the FLSA’s “white collar” exemptions.

Will the injunction become permanent?  Will it be upheld by the Fifth Circuit? 

Will the Department of Labor continue to defend the case when the Trump Administration is in place? 

What does the rationale behind the District Court’s injunction (that the language of the FLSA suggests exempt status should be determined based only on an employee’s duties) mean for the $455-per-week salary threshold in the “old” regulations?

As noted in our post regarding the injunction, whether employers can reverse salary increases that already have been implemented or announced is an issue that should be approached carefully.

For example, employers should be aware that state law may specify the amount of notice that an employer must provide to an employee before changing his or her pay.

In most states, employers merely need to give employees notice of a change in pay before the beginning of the pay period in which the new wage rate comes into effect.

But some states require impose additional requirements.  The New York Department of Labor, for example, explains that if the information in an employee’s wage statement changes, “the employer must tell employees at least a week before it happens unless they issue a new paystub that carries the notice. The employer must notify an employee in writing before they reduce the employee’s wage rate. Employers in the hospitality industry must give notice every time a wage rate changes.”

Maryland (and Iowa) requires notice at least one pay period in advance.  Alaska, Maine, Missouri, North Carolina, Nevada and South Carolina have their own notice requirements.

Employers who are making changes to wage rates based on the status of the DOL’s regulations should be nimble – while also making sure that they are providing the notice required under state law.

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