High Court's Recent Actions Affected Minimum Wage, Overtime

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By Howard Perlman

The Supreme Court released decisions during its 2015-2016 term that affect employers' compliance with federal wage and hour laws.

During the term that ended June 28, the major subjects relevant to payroll were compensability of time for changing clothes at work and exemptions from overtime requirements.

The high court, through declining to consider an appeal, also affirmed the validity of the Labor Department's 2013 final rule that extended federal minimum wage and overtime protections to certain home-care workers. Here are the decisions:

Representative data. Wage and hour class actions sometimes may be established based on the compensation experiences of a sample of the employees, without including specific payment data for each employee, the Supreme Court said in a decision regarding compensability of time for changing clothes ( Tyson Foods Inc. v. Bouaphakeo , 2016 BL 87179, U.S., No. 14-1146, 3/22/16 ).

Before the court's decision in this case, it had been unclear if a representative sample could be used to certify a class action, David C. Frederick, the lawyer who represented the employees in this case, told Bloomberg BNA. The court's decision made it easier for employees to unite in seeking back pay from employers.

A representative sample of employees may be used in class certifications to determine the average amount of time that all class members spent changing into and out of special gear, as long as each employee in the class could rely on the data for that sample group if they individually were to sue the employer, the court said.

“In this case each employee worked at the same facility, did similar work, and was paid under the same policy,” the court said. “Under these circumstances the experiences of a subset of employees can be probative as to the experiences of all of them.”

Rule applicability. The Labor Department's 2011 rule that caused certain service advisers at car dealerships to be nonexempt from Fair Labor Standards Act overtime provisions was not properly established, so a lower federal appeals court that relied on the rule when deciding that the employees were nonexempt needed to again review whether back pay was owed to the advisers, the Supreme Court said ( Encino Motorcars LLC v. Navarro, 2016 BL 196078, U.S., No. 15-415, 6/20/16 ).

An amendment to the FLSA enacted in 1966 exempted “any salesman, parts man, or mechanic primarily engaged in selling or servicing automobiles” at certain dealerships from the overtime requirements of the FLSA. The Labor Department in 1987 adopted a rule clarifying that service advisers at such dealerships were exempt from the overtime requirements of the FLSA under the 1966 amendment, which was codified as Section 213(b)(10)(A) of the U.S. labor code.

The Labor Department in 2011 adopted a final rule ( RIN 1215-AB13, 1235-AA00) that overrode its 1987 rule and established the department's position that service advisers were nonexempt. The Supreme Court said the 2011 rule could not bind judges to accept its terms because the rule was “procedurally defective,” as agencies are required to “give adequate reasons” for changing rules but the “2011 regulation was issued without the reasoned explanation that was required,” the court said.

When an agency fails “to provide even a minimal level of analysis” regarding a rule that revises a previous rule, “its action is arbitrary and capricious and so cannot carry the force of law,” the court said.

Home-care workers. A federal appeals court decision that the Labor Department had authority to issue its 2013 home-care worker final rule ( RIN 1235-AA05) was maintained by the Supreme Court when it declined June 27 to review a home care industry group's appeal of the case ( Home Care Ass'n of Am. v. Weil, U.S., No. 15-683, cert. denied 6/27/16 ).

In general, at least four Supreme Court justices must agree to review an appeal for the high court to conduct the review and issue a decision. The department started to enforce the rule Nov. 12, 2015.

An amendment to the FLSA enacted in 1974 exempted from the act's minimum wage and overtime requirements domestic service employees who either provide companionship services to certain individuals who require assistance in caring for themselves or live in the household where they provide services. These exemptions are collectively known as the companionship-services and live-in exemptions.

The Labor Department implemented regulations in 1975 regarding the 1974 amendment, but the 2013 final rule adjusted the definition of companionship services by limiting, to a greater degree than in the 1975 regulations, the types of jobs that would be considered to involve companionship services and therefore be exempt from FLSA minimum wage and overtime requirements.

Also under the 2013 rule, third-party agencies that employ domestic service employees cannot use the companionship-services and live-in exemptions to prevent them from being covered by the FLSA's minimum wage and overtime protections.

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