Management Attorney Examines Impact of Upcoming Supreme Court Decision on Class Action Waivers, Highlights Recent Ninth Circuit Cases

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Employment Law

In a September 2017 interview, Cheryl Orr discusses the Supreme Court’s upcoming decision on the class action waiver issue and its potential impact on litigation and employer arbitration programs. She also highlights other noteworthy topics, such as significant cases before the U.S. Court of Appeals for the Ninth Circuit, the U.S. Department of Labor’s revocation of Administrator Interpretation No. 2015-1, and the rise of state and local employment laws developments.

Cheryl Orr

Cheryl D. Orr (interviewed by Katherine P. Simms)

Cheryl D. Orr ( cheryl.orr@dbr.com) is an elected managing partner of Drinker Biddle & Reath LLP and chair of the firm’s national Labor and Employment Practice Group. Cheryl concentrates her practice on defending employers nationwide against complex wage-and-hour class, collective, and representative actions arising in industries including retail, health care, education, insurance, finance, and manufacturing. She also has a long history of resolving wrongful termination, unfair competition, and discrimination cases through a winning motion practice. The Daily Journal has named her as one of California’s Top Employment Lawyers and Top Women Lawyers. She is a fellow of the Litigation Counsel of America and a member of the American Employment Law Council.

Bloomberg BNA:

On June 27, the DOL announced the reinstatement of the Wage and Hour Division’s practice of issuing opinion letters.

Is it expected that the DOL will begin issuing opinion letters regarding the Fair Labor Standards Act, and what types of issues are they likely to address?

Orr:

In 2010, the DOL stopped issuing opinion letters and offered only administrative interpretations. Secretary of Labor Alexander Acosta’s announcement that the DOL will resume issuing opinion letters is a welcome development for employers. It is anticipated that through these letters, the DOL will offer guidance on issues under the FLSA and the Family Medical Leave Act in response to fact-specific inquiries from employers and employees.

We would expect further guidance on employee classifications, overtime, paid leave, and minimum wage issues. What the issues are will be influenced by the inquiries posed, which are submitted online. The Wage and Hour Division exercises discretion in determining which requests for opinion letters merit a response.

Bloomberg BNA:

How can defense litigators utilize these opinion letters in their litigation strategy?

Orr:

Courts have historically considered opinion letters to be nonbinding but have acknowledged them as a good-faith defense. Thus, litigators can bolster their litigation positions to the extent their clients’ actions align with the opinion letters and give credence to their reliance on the letters.

Bloomberg BNA:

Is there a connection between the issuance of opinion letters and the rise (or decline) of wage-and-hour litigation

Orr:

If opinion letters are issued, they may offer clearer guidance that is helpful to employers on wage-and-hour issues but most probably won’t impact (at least in the short term) the volume of litigation.

Bloomberg BNA:

On Aug. 31, a federal judge issued a decision striking down the Obama-era overtime rule, which doubled the minimum salary level for the overtime exemption.

What does this decision mean for employers?

Orr:

To the extent that there is existing litigation that addressed the misclassification of exempt employees who would have been impacted by a change in the salary basis test, the guidance is presently clear. To the extent that the exemption turned on that test, these cases should now have a path to resolution.

Bloomberg BNA:

How is the Trump administration addressing the overtime rule issue?

Orr:

The DOL has solicited comments designed to craft a new replacement rule. The comment period closed on Sept. 25, 2017. The requests for information signaled that the salary levels would be lower than those adopted in 2016 (and subsequently rejected by the courts), and would most probably set the salary levels at an amount that would work in tandem with the duties test.

Bloomberg BNA:

Might the U.S. Court of Appeals for the District of Columbia’s decision in NLRB v. CNN Am., Inc., No. 15-1112, have an impact on the future of joint employment issue litigation?

Orr:

In this matter, the D.C. Circuit found that the NLRB hadn’t sufficiently explained its reason for deviating from the “direct and immediate” control standard and instead applied a broader “share or codetermine” standard for determining whether two separate entities are joint employers under the NLRA. The matter has been remanded to the NLRB to explain its reasoning. So while the decision is a short-term victory for employers, the NLRB could stand by its decision and just better explain it.

Bloomberg BNA:

Does the D.C. Circuit’s decision affect advice counsel might provide to employers concerning the joint employer issue?

Orr:

Given that the joint employer issue is far from resolved and that the NLRB v. CNN Am., Inc. matter has been remanded for further consideration, this decision wouldn’t impact our advice on avoiding or minimizing joint employer findings.

Another important development on the joint employer issue is the DOL’s withdrawal of the Obama-era Administrator Interpretation No. 2016-1, which took an expansive approach to what constituted a joint employer relationship. Until this issue is fully resolved by the courts, we would recommend that employers proceed with caution and try to comply with the broadened standard.

Bloomberg BNA:

Oral arguments before the Supreme Court have been scheduled for Oct. 2 for the class action waiver cases Ernst & Young LLP v. Morris, No. 16-300, Epic Systems Corp. v. Lewis, No. 16-285, and National Labor Relations Board v. Murphy Oil USA Inc., No. 16-307. Many employers currently involved in class action litigation on this issue have moved to stay proceedings pending a decision.

Is it likely that employers will continue to have these stays granted, where a decision by the court may not be issued until 2018?

Orr:

Requests for stays in this context haven’t always been successful, and their likelihood of success can vary greatly by jurisdiction and judge.

Bloomberg BNA:

From an employer’s perspective, how might the Supreme Court’s decision in these class action waiver cases affect the future of litigation and employer arbitration programs?

Orr:

All employers of any appreciable size face the prospect of wage-and-hour class action litigation whether meritorious or not. If the U.S. Supreme Court upholds the validity of class action waivers, it is anticipated that employers will move toward implementing arbitration programs on a much larger scale. However, it is anticipated that even with a favorable ruling, plaintiffs will look to find end runs, such as bringing California Private Attorney General Act (“PAGA”) actions.

Bloomberg BNA:

Is the Supreme Court likely to take up any other pertinent wage-and-hour issues, such as independent contractor classification in the future?

Orr:

While not presently part of its upcoming docket, independent contractor classification remains hotly litigated in the lower courts, so we wouldn’t be surprised to see the U.S. Supreme Court take up the issue in the next few years. Certainly, the Trump administration’s revocation of the Obama administration’s Administrator Interpretation No. 2015-1 keeps the issue front and center.

Bloomberg BNA:

What recent and relevant cases should employment law practitioners be aware of?

Orr:

Cases for practitioners to watch include: Marsh v. Alexander’s, No. 15-15791, a Ninth Circuit decision that created a circuit split by rejecting the DOL’s interpretation of FLSA regulations on use of the tip credit to pay regularly tipped employees, and McKeen-Chaplin v. Provident Bank, No. 15-16758, a Ninth Circuit decision that differed from other circuits (including the Sixth Circuit) in relying on the administrative/production dichotomy in determining whether underwriters were properly classified as exempt employees under the administrative exemption.

Bloomberg BNA:

Are there other key employment law issues practitioners and employers should monitor?

Orr:

Employers should closely monitor parallel developments on a state and local level, as those jurisdictions look to play a role in enforcing and providing additional protection to employees in areas such as equal pay laws, minimum wage, and paid leave laws.

This patchwork of laws can lead to complex compliance hurdles, so it is important to stay vigilant. The second-highest number of wage-and-hour cases were filed in 2016, and settlement values in these cases continue to rise significantly. Since 2014, the value of the top 10 wage-and-hour settlements has tripled. Given the relatively small investment plaintiffs’ counsel must make in the cases and the potentially large payoff, we expect these figures to continue to rise.

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