Employers May Feel Safe Surrendering to New Labor Department

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Ben Penn

The Trump Labor Department may have a gift in store for mega-employers like Wal-Mart that could help them avoid multimillion-dollar wage lawsuits.

Prior to the Obama administration, the department’s Wage and Hour Division let companies voluntarily report minimum wage and overtime violations in exchange for a guarantee that workers couldn’t sue. After a recent uptick in employer-friendly announcements from Labor Secretary Alexander Acosta, the business community is hoping the DOL brings back the controversial self-reporting practice.

During the George W. Bush’s administration, a reporting company was allowed to submit a self-audit, and the WHD supervised the payment of back wages to employees without conducting a full government investigation. The key sweetener for employers—especially at large, multistate companies, which are more vulnerable to class actions—was that workers had to waive their rights to private litigation before accepting the checks.

Bringing self-reporting back would advance the new administration’s efforts to improve cooperation with employers by using a carrot instead of a stick. This would be another about-face from Obama’s DOL, which emphasized thorough, targeted workplace investigations, frequently assessing double damages to make workers whole.

“I don’t like the idea that it draws wage-hour resources away from what might be a more important violation that needs to be investigated,” Libby Hendrix, who retired in 2013 as a WHD assistant administrator, told Bloomberg BNA. “The upside, obviously, is people are getting money that they might not otherwise receive.”

Hendrix, a career official for more than 30 years, said she’s uneasy about transferring investigative authority to the hands of management attorneys who conduct the self-audits.

$33M Wal-Mart Deal

Wal-Mart Stores Inc. took full advantage of the voluntary compliance method in 2007, culminating in an agreement to pay $33 million to some 90,000 workers nationwide. The settlement, which involved unpaid time-and-a-half overtime wages, remains one of the largest in WHD history.

Tammy McCutchen, a WHD administrator in the early 2000s and now a Littler Mendelson attorney, is hopeful this tool will again become an option for businesses looking to avoid liability and for workers searching for faster wage recovery. Littler Mendelson represented Wal-Mart during the 2007 WHD deal.

“It’s good for everybody—you get the mistakes corrected, back wages paid, and you’re not wasting money on plaintiffs’ lawyers,” McCutchen told Bloomberg BNA. “There is a solid chance” this returns, she said. “I think there are a lot of people in the business community who really would like to see this come back,” she said.

Employers always have the option of paying workers any wages owed without involving the government. But unless they self-report to the WHD, the employees could still go to a plaintiffs’ attorney to seek a larger payday in court.

The division is fresh off a June 27 announcement that it is reviving another Bush administration compliance method favored by management: Issuing WHD opinion letters that respond to stakeholder questions on legal ambiguities. Those letters give employers a chance to use a good faith defense against wage and hour claims in court.

The department declined to comment on whether it will also reestablish the supervision of employer back wage payments. But for an agency that’s been placing a greater priority on compliance assistance, it may fit the bill to give businesses the government’s blessing to turn themselves in.

Obama DOL Went for Damages

Self-reporting became an increasingly popular device for management attorneys toward the tail end of the Bush administration. Obama’s DOL adopted a wholly different perspective.

Companies were still welcome to self-report, but not with an assurance that WHD wouldn’t investigate. Employers rarely, if ever, did. The Obama White House’s position was that it wouldn’t abdicate its right to conduct a full, independent investigation after an employer came forward.

“That was definitely not the approach that we took and it’s not one that I would support taken,” Laura Fortman, an acting WHD administrator under Obama, told Bloomberg BNA. “The Wage and Hour Division is often the agency of last resort for these employees, and you need to make sure that you’re doing a thorough investigation and making sure that they receive all of the back wages that they are due.”

Those investigations often yielded liquidated damages, giving employees double the amount of back pay owed, and a third year of wages collected, rather than McCutchen’s preferred practice of two years.

The Obama WHD complemented enforcement with compliance assistance to teach employers about their legal responsibilities. But the management bar advised clients not to trust full cooperation with an agency prone to deep workplace audits.

“In the last eight years, I don’t think anybody in their right mind would’ve ever approached the Labor Department with the idea of turning itself in and then volunteering to do a back wage payment,” Jim Coleman, who co-chairs the wage-hour practice at management firm Costangy, told Bloomberg BNA.

Employers always have the option of correcting violations without involving the DOL, but workers could still seek a bigger payday in private court.

WHD Brings Anxiety

Under Acosta and his as-yet unnamed WHD administrator, the business community perception of the agency is on the mend.

That doesn’t mean all employers will be lining up to submit their audit reports for government approval.

Brett Bartlett, who used to urge management clients to self-report violations to the WHD under Bush, said some businesses will never surrender to the government regardless of the administration.

“It’s an anxiety-causing process because when you approach the Wage and Hour Division, you don’t really know what their reaction is going to be,” Bartlett, co-chair of the wage-and-hour litigation practice at Seyfarth Shaw, told Bloomberg BNA.

As they wait for signals from Acosta that this WHD program will reopen for business, Bartlett said some companies are already looking forward to the prospect of having this tool once again at their disposal.

If the Trump DOL does facilitate employer confessions, it will be supported by management as a win-win for workers and employers.

Yet others, particularly those who operated inside the agency under Obama, will have doubts. Count the former civil servant Hendrix among them.

Thinking back on the pre-Obama practice, she said, “People were getting back wages that were due back wages, even though Wage Hour had not done an investigation. That’s always an advantage, I guess.”

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

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Chris Opfer at copfer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Labor & Employment on Bloomberg Law