Shift in Wage-and-Hour Enforcement May Not Be Radical

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By Martin Berman-Gorvine

The ferment that President Barack Obama’s Labor Department generated on wage-and-hour issues is likely to die down under the Trump administration, management-side attorneys say.

The Trump administration is likely to pull support for the increase in the upper threshold for overtime pay proposed under Obama, causing it to “die a natural death,” Bob Kilroy, a partner in management-side law firm Mirick O’Connell, told Bloomberg BNA Jan. 17.

The DOL had finalized a rule in May that doubled the annual salary threshold below which workers are entitled to overtime—to $47,476 from $23,660. Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas Nov. 22 granted a motion by 21 states to temporarily halt the Labor Department’s overtime rule ( Nevada v. DOL, E.D. Tex., No. 4:16-cv-00731, motion granted 11/22/16). He found that the Fair Labor Standards Act doesn’t give the DOL authority to create a salary test for overtime exemption. The DOL appealed this decision to the Fifth Circuit.

The “good news” is a majority of the judges on that appeals court were appointed by Republican presidents, but the “bad news” is that they granted the expedited hearing the DOL requested, Tammy McCutchen, principal at employer-side law firm Littler Mendelson and vice president of strategy for ComplianceHR, said Jan. 17. McCutchen was an administrator of the Labor Department’s Wage and Hour Division under President George W. Bush.

Both Kilroy and McCutchen said that the DOL could stop pursuing the appeal under a Trump secretary of labor, such as his controversial appointee, Andrew Puzder, or that it could begin a new rulemaking process. Kilroy said a new rulemaking could take 18 months.

The outcome of such a rulemaking could be a more “reasonable” threshold of $35,000 to $38,000 a year, McCutchen said.

Meanwhile, McCutchen said, the “earliest decision possible” in the ongoing legal case would come in March or April. Mazzant is considering making his injunction permanent, and the AFL-CIO has requested to intervene if the Trump administration refuses to defend the rule, which, she noted, would result in retaining the status quo, $23,660 level.

A final possibility Kilroy mentioned would be for Congress to amend the FLSA itself, but he said that’s “not likely” and that the entire issue is likely to be relegated to “the back burner” during Trump’s first 100 days in office.

Enforcement Won’t Stop

That doesn’t mean employers should rest completely easy, McCutchen warned. “I think we’ll see some relief on overtime, but I don’t think it’s reasonable for employers to say that under Trump, we don’t have to worry about compliance” on wage-and-hour issues, she said.

McCutchen expects a change of emphasis in WHD enforcement, including a refocus on employee complaints, a reduction of “targeted initiatives” on given industries and geographical areas, and an end to “abusive investigation practices” such as DOL officials showing up with no notice or less than 24 hours’ notice and demanding that employers produce documents in less than 72 hours.

The “new DOL,” McCutchen predicted, will be “more willing to negotiate over back remedies and settle for two years’ back wages. “Republicans do enforce; after all, we are the law-and-order party.” She also predicted an increase in back wages collected by the DOL under the Trump administration.

McCutchen said she is “pretty skeptical” anything will happen before Puzder’s confirmation, which, according to her latest information, will happen in mid-February despite opposition from what she called “the usual suspects,” such as Democrats, unions and “disgruntled employees” of Puzder’s CKE Restaurants Inc. Other posts won’t be filled until later, she said.

McCutchen also predicted:

  •  President Obama’s executive orders for federal contractors on minimum wage, paid sick leave and “blacklisting” of those that have violated labor regulations would be rescinded.
  •  The Trump administration’s first 100 days “will be focused on rolling back and stopping things” that began under the Obama adminsitration, such as executive orders, guidance, National Labor Relations Board general counsel memos and WHD administrator’s interpretations.
  •  On wage-and-hour issues, “the cost to employers of noncompliance is and will remain very high.” FLSA claims can’t be settled privately, she pointed out. Additionally, there is individual liability against company officers for violations, and wage earners are secured creditors, so their claims can’t be discharged in a business bankruptcy.
  •  There will be opportunities for employers to work more cooperatively with theDOL to achieve compliance, through compliance assistance (as in the George W. Bush administration), opinion letters (which the Obama administration had stopped), self-audits and voluntary compliance.

Kilroy also predicted that:

  •  “Not a lot of energy” will be put into developing new DOL policies on misclassification of employees as independent contractors and related gig economy matters, nor even into enforcement.
  •  “The NLRB will become much more Republican,” less activist on social media issues, and more reactive and willing to work with employers.
  •  Trump may follow through on his campaign pledge to seek six weeks of paid maternity leave, a pet issue of his daughter Ivanka.
  •  Pay equity laws will continue to spread across some states.

Hardy Perennials for Employers

Regardless of which way the political wind is blowing, employers should still keep a clean nose on wage-and-hour compliance. McCutchen said the top 10 compliance failures employers should look out for are, in reverse order:

  •  Failure to communicate compensation policies clearly to employees;
  •  Timekeeping practices that fail to capture all hours worked.
  •  Forgetting about minimum wage compliance—federal, state and local.
  •  Failure to include “all remuneration” in the regular rate.
  •  Not paying employees for meeting and training time.
  •  Not paying employees for travel time.
  •  Failing to provide or pay for meal or rest breaks. Employees must stop deducting the unpaid meal break from employees’ time. In hundreds of lawsuits, employees have said they worked through that break for years, and employers can’t easily prove otherwise.
  •  Late or short final paychecks.
  •  Misclassifying employees as independent contractors. “Few issues have been hotter over the past few years,” and this is not likely to change too radically even under the Trump administration.
  •  Misclassifying employees as exempt from being paid overtime. Whatever cutoff pay level DOL ultimately settles on, employers shouldn’t forget about the “duties test” that determines whether employees can be classified as exempt, managerial employees.

McCutchen was speaking Jan. 17 in a webinar sponsored by Littler.

To contact the reporter on this story: Martin Berman-Gorvine in Washington at mbermangorvine@bna.com

To contact the editor responsible for this story: Tony Harris at tharris@bna.com

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