Employer Uncertainty May Accompany Actions By Labor Department on Overtime, Guidance

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By Christine Pulfrey and Michael Trimarchi

The Labor Department's legal and regulatory efforts to deal with an overtime rule that remains on hold suggests a complicated approach that, until resolved, promises uncertainty and challenges for employers trying to steer clear of wage and hour litigation.

Additionally, the use of opinion letters instead of administrator interpretations to offer guidance to employers under the Fair Labor Standards Act was revived June 27 by the Labor Department.

The Justice Department filed a brief on behalf of the Labor Department with the U.S. Court of Appeals for the Fifth Circuit on June 30, 2017, requesting that the court reverse a district court ruling that temporarily halted an overtime rule from taking effect Dec. 1, 2016, because the ruling “was premised on an erroneous legal conclusion.” The department asked that the appeals court also reaffirm the Labor Department’s authority to establish a salary-level test.

These requests followed the same approach taken in the case under the Obama administration in requesting that the court recognize the Labor Department's rulemaking authority to set a salary threshold. However, they diverge by asking that the court “not address the validity of the specific salary level set by the 2016 final rule ($913 per week), which the department intends to revisit through new rulemaking” ( Nevada v. DOL, No. 16-41606 (5th Cir.)).

The overtime rule that was to take effect would have more than doubled to $47,476 the annual salary threshold below which workers would automatically be eligible to earn overtime and was expected to have made about 4 million workers eligible for overtime pay.

In testimony at his March 22 confirmation hearing , Acosta questioned whether the salary level was a good way to determine overtime eligibility. Applying a straight inflation adjustment would result in an updated figure of about $33,000, he said.

Agency Moving Forward on 2 Tracks

The Justice Department initiated its appeal of the overtime rule Dec. 1, 2016, after it notified the Fifth Circuit that it was challenging a preliminary injunction that was imposed Nov. 22, 2016, by U.S. District Court Judge Amos Mazzant that delayed the overtime final rule from taking effect on Dec. 1, 2016, as scheduled.

The district court said that the Labor Department lacked the authority to use salary level to determine whether employees qualify for one of the Fair Labor Standards Act’s white-collar exemptions from overtime wage payments.

The Labor Department was granted an expedited appeal Dec. 8, and was granted requests by the court Jan. 26, Feb. 22, and April 19 to delay filing briefs in the case. With the June 30 filing, the case is now fully briefed. The next steps generally would be oral arguments followed by a court ruling.

On June 27, the Labor Department sent a formal request for information on the rule to the Office of Management and Budget, Acosta said at an appropriations hearing by the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies.

“The request would ask the public to comment on a number of questions that would inform our thinking” on issues related to the rule, how often to raise the salary threshold and by how much, Acosta said at the hearing in response to questions from Sen. Lamar Alexander (R-Tenn.).

Road Ahead Unclear

When any rulemaking that the Labor Department might pursue with regard to the overtime rule would happen or how long it would take is unclear, said James M. Coleman, a lawyer focused on wage and hour law at the Constangy, Brooks, Smith & Prophete LLP office in Virginia.

Why the Labor Department did not seek more time or try to temporarily halt the appeal while it pursued rulemaking also was unclear, but it may be because the department thought it needed “to obtain a reversal of the lower court’s holding that it lacks the legal authority to set minimum salary levels as part of the criteria for determining exempt status,” Coleman said in a July 6 article on the firm's website, “DOL Plows Ahead on Appeal of Injunction Against Obama ‘Overtime Rule.’”

Also unclear was whether the Labor Department plans to formally withdraw the overtime final rule, “a withdrawal that ideally needs to be retroactive to Dec. 1, 2016, to prevent the potential for private litigation through collective action lawsuits,” Coleman said.

If the appeals court were to issue a reversal, vacating the preliminary injunction, “legal arguments could be made both for and against private enforcement of the higher salary requirements during the pendency of the injunction,” Coleman said.

The U.S. Chamber of Commerce and other business groups, in a separate challenge to the regulations that is pending, are seeking to invalidate the overtime rules on other grounds. “At any time, the district court could issue a ruling in that case, addressing whether the $913 salary level is arbitrary and capricious, and that ruling could also be appealed to the Fifth Circuit,” Coleman said.

Also to be determined is the status of a Dec. 9 motion, filed by the Texas AFL-CIO with the district court, to intervene and defend the final rule were the Labor Department to withdraw from the case.

Acosta Revives Opinion Letters

The move by Acosta to rely on opinion letters rather than administrator interpretations clearly altered the course of the Labor Department.

The letters were a Wage and Hour Division mainstay for more than 70 years until March 2010, when the Obama administration changed the policy. For seven years, the division responded to guidance requests by providing references to statutes, regulations, interpretations, and relevant cases, but without an analysis of the facts that were presented.

“Reinstating opinion letters will benefit employees and employers as they provide a means by which both can develop a clearer understanding of the Fair Labor Standards Act and other statutes,” Labor Secretary Alexander Acosta said June 27 in a statement. “The U.S. Department of Labor is committed to helping employers and employees clearly understand their labor responsibilities so employers can concentrate on doing what they do best: growing their businesses and creating jobs.”

Under the renewed policy, the division established a webpage with resources for employers and workers. For employers, the resources include access to a regulatory library, industry-specific information, bulletins, forms, notice of a change in email address, and posters.

The webpage offers a link for employers to request an opinion letter that would detail how a law enforced by the Wage and Hour Division would apply in specific circumstances. The request should include the statute and regulations related to the opinion sought; a description of the employer's business and the facts involved in the request; and the amount of compensation involved.

A request for an opinion may be withdrawn before guidance is issued, with the withdrawal request sent in a letter or email, the webpage said.

The policy change regarding opinion letters appeared to be coming earlier in June after the Labor Department withdrew interpretations that broadly defined employee status and what may be a joint-employment relationship.

The interpretations, which were issued by David Weil, who was Wage and Hour Division administrator during the Obama administration, were conceived so that more workers could be considered employees and more entities could be considered joint employers.

“Removal of the two administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act or Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department's long-standing regulations and case law,” the department said.

To contact the reporters on this story: Christine Pulfrey in Washington at cpulfrey@bna.com and Michael Trimarchi in Washington at mtrimarchi@bna.com. To contact the editor responsible for this story: Michael Baer at mbaer@bna.com.

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