Welcome or Not, More Interpretations Likely From WHD

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By Ben Penn

Dec. 15 — Though opinions vary on the usefulness of Wage and Hour Division administrator's interpretations, one area in which former Labor Department officials, employer representatives and worker advocates agree is that the agency is likely to issue more of this guidance before the clock runs out on the Obama administration.

The WHD announced early in the administration that it would provide employers with compliance assistance via written administrator's interpretations, replacing the practice that ended in 2010 of publishing opinion letters that responded to questions about particular topics and circumstances (56 DLR AA-1, 3/25/10).

Since then, the agency has only sparingly released such administrator's interpretations, which sources said are intended to apply laws and regulations to hot topics affecting a broad range of workers and employers while also encouraging judges and state labor agencies to follow suit. The WHD issued a total of eight AIs during the Obama administration.

But the upcoming final year of the Obama administration is seen by some as a ripe time to issue more interpretative guidance.

Among those who expect at least one administrator's interpretation in 2016 is Seth Harris, who as deputy labor secretary in 2010 directed the switch from opinion letters to AIs. “I know there have been discussions about additional administrator's interpretations, and I expect that we'll see at least one more before the end of the Obama presidency,” Harris, who left the DOL in 2014, told Bloomberg BNA in a Dec. 11 interview.

Echoing Harris, Paul DeCamp, the WHD administrator from 2006-2007, told Bloomberg BNA Dec. 9: “In the last year of any presidential term, there is oftentimes a big rush to get a lot of guidance out the door.”

“Every administration wants to meet its mark,” added DeCamp, now a shareholder at Jackson Lewis P.C. in the Washington, D.C., region. “I would expect them to issue at least one” administrator's interpretation, “if not several in the coming year,” he said.

Although administrator's interpretations have been rare, the most recent one in July on misclassification drew significant attention and controversy by stating that “most workers are employees under the” Fair Labor Standards Act and not independent contractors (135 DLR AA-1, 7/15/15).

A future AI in 2016 could delve deeper into current WHD Administrator David Weil's research on “fissured” employment arrangements, perhaps by explaining when separate entities should be considered joint employers of workers, or clarify how the department interprets compensable time, sources told Bloomberg BNA.

Wage and hour law practitioners use the administrator's interpretations to gauge the WHD's current enforcement policy and monitor them because they're entitled to judicial deference, DeCamp said.

However, the extent to which the AIs persuade courts “depends very heavily on which judge you're in front of,” DeCamp observed.

‘Underground Regulations’ the Surprise of 2016

Business groups and management attorneys worry that administrator's interpretations are another form of regulation, except without the public notice-and-comment period.

Marc Freedman, director of labor law policy at the U.S. Chamber of Commerce, told Bloomberg BNA last month that upcoming regulations cause him less concern than “the non-regulatory items—the guidances, the letters of interpretation.”

“The things that are more troubling are the ones you can't have a role in that show up without any notice,” Freedman said Nov. 20. “I'm concerned that we'll see” more AIs in the next several months, he said.

A DOL spokesman said in a Dec. 11 statement that AIs “do not impose any new obligations on employers or represent a change in the department's statutory interpretation or policy.” Rather, they “provide additional detail and analysis of the department's long-held positions.”

But to some, the release of AIs without notice and the opportunity for public input amounts to more than just an unwanted surprise—it might violate federal law.

“The danger of allowing administrator's interpretations is it gives the agency a way to evade the procedural protections of the Administrative Procedure Act, and to issue underground regulations,” Decamp said. He asserted that the recent administrator's interpretations “probably violate” the APA.

However, an APA challenge was rejected by the U.S. Supreme Court earlier this year, which found 9-0 in Perez v. Mortgage Bankers Ass'n, 24 WH Cases2d 529 (U.S. 2015), that the DOL and other agencies can change regulatory interpretations without formal notice-and-comment rulemaking (45 DLR AA-1, 3/9/15).

The DOL's authority in that case was upheld “on a fairly narrow ground” and still could be subject to a different challenge than the one initially brought in 2010, DeCamp said.

Worker Advocates Want More Interpretations

Within the employee advocacy community, the administrator's interpretations are considered a necessary and helpful method to achieve compliance that has been underused.

“Employers and workers needed guidance on a lot of these hot topics because the courts tend to be a little inconsistent in the application of the laws,” Catherine Ruckelshaus, general counsel and program director at the National Employment Law Project, told Bloomberg BNA Dec. 8.

“I think” Weil “is pretty devoted to trying to generate some additional” administrator's interpretations, but considering the WHD has issued only five interpretations of the FLSA since 2010, the switch to AIs “was very slow to get going,” Ruckelshaus said. Her role at NELP includes coordinating with non-profit organizations, state agencies and private attorneys on developing enforcement best practices.

Provided they're not coming from a Republican administration, interpretations from the DOL are always helpful, said Stan Saltzman, a partner at Marlin & Saltzman in Southern California. The AIs serve as a reminder that the government's intent should be to narrowly interpret FLSA exemptions to protect workers, he told Bloomberg BNA Dec. 14. Saltzman is currently representing groups of truck, transport van and messenger delivery drivers in misclassification cases.

Harris, who now practices law at Dentons in Washington, D.C., and teaches at Cornell University, said he is disappointed that the WHD has not produced interpretations covering more topics in recent years. “That's not a failure on their part” because the division has been forced to shift resources to “take on large complicated regulatory projects that serve an even broader purpose than the administrator's interpretations,” he added.

AIs Released Sparingly

On the same day that the WHD announced AIs would replace opinion letters, the division published its first administrator's interpretation, clarifying that mortgage loan officers are not exempt from the FLSA. The agency then issued an AI a few months later that overturned several Bush-era opinion letters that excluded the period employees spend changing clothes from compensable time (115 DLR AA-1, 6/17/10).

But the department then went nearly four years without a new administrator's interpretation on the FLSA, before issuing two AIs in 2014 on home care workers—the first to explain how the FLSA applies to shared living arrangements (70 DLR A-8, 4/11/14) and the second to clarify when public entities qualify as joint employers of home care workers (127 DLR A-3, 7/2/14). Another full year passed before the next WHD interpretation of the FLSA, on independent contractor misclassification in July.

In the meantime, the WHD also issued administrator's interpretations three times on non-FLSA topics: a 2010 AI stating the Family and Medical Leave Act provides leave rights to those caring for a child, regardless of their legal or biological relationship to the child (119 DLR AA-1, 6/23/10); a 2013 administrator's interpretation that an employee can take FMLA leave to care for an adult child with a disability (13 DLR A-11, 1/18/13); and a December 2012 AI that pine straw activities qualify as “agricultural employment” for purposes of several federal laws.

In addition to AIs, the WHD also issued 10 field bulletins during the Obama administration to provide WHD investigators and others with guidance on such topics as enforcement of tip-credit regulations and assessment of civil money penalties for illegal child labor.

Labor Solicitor M. Patricia Smith, when asked about the AIs at a 2012 seminar, confirmed Harris's explanation for the slow issuance of administrator's interpretations. Work on an “aggressive” rulemaking agenda has taken priority over AIs and other WHD guidance, Smith said, citing a now final rule to extend FLSA provisions to home care employees (29 DLR B-1, 2/13/12)(29 DLR B-1, 2/13/12).

The agency currently is reviewing nearly 300,000 comments (29 LRW 1893, 9/16/15)(175 DLR C-1, 9/10/15) regarding a proposed rule to more than double the minimum salary that exempts workers from overtime pay under the FLSA (125 DLR AA-1, 6/30/15). According to the latest regulatory agenda, the WHD estimated it would publish the final rule in July (224 DLR AA-1, 11/20/15).

Several Key Topics Left to Address

Regardless of their perspective on administrator's interpretations, wage and hour law practitioners are anticipating that the WHD will issue one or more in the coming months.

Several sources raised the possibility that the DOL could issue an administrator's interpretation on what constitutes compensable time under the FLSA.

Ruckelshaus of the National Employment Law Project said she's “heard some rumblings” that a potential guidance could follow up on the Supreme Court's ruling last year in Integrity Staffing Solutions, Inc. v. Busk, 135 S. Ct. 513, 23 WH Cases2d 1485 (U.S. 2014) that warehouse workers for an Amazon.com contractor don't have to be paid for time spent going through anti-theft security screens (236 DLR AA-1, 12/9/14).

The DOL “could issue guidance that clarifies what that decision means, and what is compensable time and what isn't compensable time in a work day,” Ruckelshaus said. There has been a spike in litigation testing state laws on this topic, as it has become a common practice for retailers to require security screenings, she said.

The issue of compensable time will also arise with an upcoming request for information on employee use of electronic devices outside of normal work hours (160 DLR A-6, 8/19/15). That RFI, currently estimated by the WHD to issue in February, may eventually lead to published guidance that, according to Harris, might actually be appreciated by employers that are in dire need of clarity on the topic.

Former WHD administrator DeCamp sees “timekeeping and compensable work”—including work on mobile devices, meal and rest periods, and travel time—as “the leading topic” for the next AI to address. He said he's heard talk that such guidance might already be in the works, and agreed with Harris that employers would find it helpful. “We're seeing increasing confusion on those issues” and greater “willingness of plaintiff's lawyers to bring cases addressing those issues,” DeCamp said.

Another open question is whether the WHD would seek to expand on its prior administrator's interpretation on misclassification by addressing the “fissured” nature of temporary, subcontracted or joint employer employment structures that current WHD Administrator Weil has devoted years to analyzing.

While the prior AI focused on who is an employee under the FLSA, it didn't directly address who or what is an employer, Ruckelshaus said.

Employers engaged in joint employment relationships, Harris said, is just as critical an issue as misclassification. “I think it's possible that the Wage and Hour administration would offer further guidance on a broad interpretation of joint employment under the FLSA,” he added.

Even the one rulemaking project occupying perhaps the largest share of the WHD's time—finalizing the overtime regulation—could spawn a separate AI that clarifies application of the rule to non-profit organizations, the former deputy labor secretary said.

“There has been a lot of unhappiness in the not-for-profit community about some” upcoming DOL regulations, including the overtime rule, Harris said. The department could clarify in an AI how nonprofits, many of which are “thinly funded service-oriented organizations,” are treated under the FLSA, perhaps by applying existing legal exemptions for nonprofits to specific regulations.

Change on Horizon

However, wage and hour law practitioners are faced with the reality that in a little over a year, the DOL's guidance policy could be completely upended by a new administration.

The consensus among employee and employer advocates is that a Republican president in 2017 would bring a distinct possibility of a return to opinion letters or new administrator's interpretations that revise or reverse the positions laid out in recent AIs.

Jonathan Keselenko, a partner at management firm Foley Hoag LLP in Boston and chair of the Wage and Hour Defense Institute, recommended that a future administration resume responding to specific inquiries by issuing opinion letters.

The WHD issuing AIs is “not particularly helpful, because what they did was they just put down on paper what their view of the law was,” Keselenko told Bloomberg BNA Dec. 14. Administrator's interpretations do, however, help attorneys reinforce for their clients what the DOL's enforcement priorities are, he added.

As much as employers may prefer to see the next administration abandon AIs, DeCamp said, there is a silver lining: “Companies would rather have guidance than get sued and potentially spend a lot of money litigating issues in court.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com