Andrew Puzder, the fast food CEO that Donald J. Trump nominated to be Labor Secretary, abruptly withdrew his name from consideration today following revelations that he was physically abusive to his wife and that he employed an undocumented worker at his home. Puzder had reportedly lost the support of several Republican senators, guaranteeing that his nomination would fail. Continue reading
President-Elect Donald J. Trump intends to nominate Andrew F. Pudzer to head the U.S. Department of Labor, according to numerous sources familiar with his office. Pudzer is the CEO of the holding company that operates the fast food chains Hardee’s and Carls, Jr., an avid blogger, and an outspoken opponent of raises to the federal minimum wage and the minimum salary requirements for “white collar” exemptions. Like most other nominees, Pudzer has no government experience, having spent his entire career in the private sector. Continue reading
As we previously reported, a federal judge in Texas recently issued a nationwide injunction putting a halt to regulations issued by the U.S. Department of Labor (DOL), which would have doubled the minimum salary needed to satisfy the “white collar” exemptions to overtime and minimum wage under the Fair Labor Standards Act (FLSA). Yesterday, the DOL appealed that decision to the U.S. Court of Appeals for the Fifth Circuit and it is expected to seek emergency consideration of the appeal. If the Fifth Circuit hears the appeal on an expedited basis, it may prevent the incoming Trump Administration from abandoning a defense of those regulations, as would be widely expected. We will keep you updated with any additional developments.
On November 22, 2016, the United States District Court for the Eastern District of Texas blocked implementation of the Department of Labor’s rule that nearly doubles the minimum salary level for the “white collar” exemptions. This means that the rule is not going into effect as planned on December 1, 2016, unless a higher court lifts the injunction.
For many years, the minimum salary level for the so-called “white collar” exemptions – those covering qualifying executive, administrative and professional employees – has been set at $455 per week. In May 2016, the Department of Labor (DOL) issued new regulations increasing the minimum salary level to $913 per week ($47,476 annually), with scheduled increases every three years beginning January 1, 2020.
In October 2016, the State of Nevada and 21 other states filed an emergency motion for a preliminary injunction to halt the implementation of the new minimum salary regulations, arguing that the DOL exceeded the authority delegated by Congress in adopting the new salary level. The suit was filed in U.S. District Court in Texas, and consolidated with another lawsuit challenging the rule brought by over 50 businesses and the U.S. Chamber of Commerce. Yesterday, Judge Amos Mazzant, an appointee of President Obama, granted the states’ motion and imposed a nationwide injunction preventing the regulations from going into effect. The court agreed that although the FLSA gives the Department “significant leeway” to establish the job duties that may qualify an employee for a “white collar” exemption, it did not authorize the DOL to define the exemption with respect to a minimum salary or to limit it with respect to salary.
This is surprising reasoning, given that the DOL “white collar” regulations have imposed minimum salary levels since 1949 that have never been challenged. But the court cited a report issued in conjunction with the original 1949 regulations, explaining that the salary level had been “purposefully set low to screen out the obviously nonexempt employees, making an analysis of duties in such cases unnecessary.” Indeed, at that time the DOL admitted that it had no authority to create a test based on salary alone. Yet because the new salary level is set so high, the court explained, it “creates essentially a de facto salary-only test,” noting that the DOL itself has estimated that 4.2 million workers who are currently exempt will lose their exemption under the new rule. Because Congress did not intend that salary alone exclude employees from exempt status, the court held, the DOL had exceeded its authority and the rule was invalid.
The preliminary injunction stays the implementation of Department of Labor’s new “white collar” exemption regulations for all employers covered by the FLSA nationwide, pending further proceedings in the District Court. An immediate appeal to the Fifth Circuit Court of Appeals is almost certain. However, given the election results and certainty of a shift in direction and priorities at the Department of Labor, it is doubtful that the agency will seek to defend the rule after Inauguration Day.
In the meantime, employers who have previously announced salary increases to maintain exempt status under the new rule face the very real dilemma of whether to go forward with the increases or put them off, given employee morale issues as well as the fact that already-announced increases could constitute a contractual promise. Employers considering withdrawing such an announced increase should consider this issue carefully in conjunction with counsel.
In April, in Kilby v. CVS Pharmacy, Inc., the California Supreme Court weighed in, at the request of the Ninth Circuit, on elements of two California Wage Orders that have, until now, received relatively little notice, and have escaped much judicial interpretation—the requirement that seating is to be made available to employees “when the nature of the work reasonably permits the use of seats.” (Emphasis added.) Unfortunately, the Court’s decision raises at least as many questions as it answers.
Before the Court were two main questions, both concerning the seating requirements of California Wage Orders: what does “nature of the work” mean when determining if employee seating is required, and, in this same context, what does “reasonably permits” mean?
The defendants, CVS Pharmacy (in a class action where the named plaintiff was a customer service representative) and JP Morgan Chase Bank (in a class action where the named plaintiffs were bank tellers), argued that “nature of the work” required a “holistic” analysis, where one basically could add up the overall duties and tasks of an employee, and consider the overall position and title, and determine whether, all things considered, the provision of seating was required.
The Supreme Court sided, not surprisingly, with the position of the California Department of Labor Standards and Enforcement in its amicus brief. Essentially, the Court said that you need to look at each discrete task and determine whether the nature of each task permits the use of seating. If, for example, a retail employee spends 90 percent of her working time stocking merchandise and 10 percent of her time ringing up sales at a cash register, and if we further assume that the “totality of the circumstances” (discussed more below) makes clear that seating is reasonable for the cashier work, but not for the stocking work, then the employer would need to provide seating for the time that the employee is performing cashier duties—regardless of the employee’s title (e.g., “stockperson” ), the fact that the majority of her tasks did not reasonably permit seating, or otherwise.
This interpretation of “nature of the work” naturally flows into the adjoining language of the Wage Orders—“when the nature of the work reasonably permits.” (Emphasis added.) And this is the part of the decision likely to cause California employers significant angst. The Court basically said that whether the nature of the work “reasonably permits” an employee to sit is based upon the “totality of the circumstances,”—in other words, a determination of what is reasonable must be based upon all of the material facts. But the Court did not provide any useful examples of what this might look like in the real world. The Court did say that the business judgment of the employer, as well as the physical layout of the workspace, were factors to be considered when looking at this “totality of the circumstances,” but no single factor was dispositive. (Notably, the defendant-employers argued that the test should be whether an employer’s business judgment was “legitimate” and not “pretextual,” harkening to the standard for employment discrimination cases under the California Fair Employment and Housing Act and Title VII of the Civil Rights Act of 1964, but this suggestion received little attention from, or discussion by, the Court.)
Takeaways: this decision is most certainly a mixed bag. On the one hand, the clarification that “nature of the work” refers to discrete tasks, and not an overall, holistic analysis provides useful guidance. Employers will have the burden to assess and analyze their employee positions to determine what “work” (tasks) merit seating. But for many such tasks, the nature of the task itself (such as cashiering versus stocking) will provide a guidepost, if not a bright line. The only bright line appears to be that the burden of proof will be on the employer—in other words, it is an employer’s burden to prove that compliance with the seating requirement is “infeasible because no suitable seating exists.”
The real conundrum for employers is that their judgment, i.e., what is “reasonable” in the totality of the circumstances, will almost certainly be second guessed by judges and juries, often in the context of class actions, and such judgment as to whether employee seating is reasonably permissible is one factor among many, and is entitled to no deference. On a related matter, the fact that the physical layout of a workspace is itself not dispositive further complicates the reasonableness analysis: it leaves the door open, for example, that a reconfiguration or enlargement of a work area, such as an enlargement of a cashier area to accommodate seating, may be “reasonable” under the law.
Also, a less discussed, but still impactful part of the Court’s decision was its discussion of the Wage Orders’ language that “[w]hen employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work and employees shall be permitted to use such seats when it does not interfere with the performance of their duties” —in other words, that when there are “lulls in operation” and such an employee is not “actively engaged in any duties,” seating must be provided. It appears that the same totality-of-circumstances and reasonableness analysis would apply to an employer’s determination of whether an employee was or was not “actively engaged” in duties. Is a customer service employee in a retail storefront actively engaged in the duty of providing customer service (including, for example, being welcoming) when there are no customers in the store, but where the store interior and the employee are visible from passersby? This would seem to rest, in part, on an employer’s business judgment, and such judgment, under this decision, is not entitled to deference, but is only one factor among many.
Future decisions from the California courts will hopefully provide more structure and guidance to employers’ “reasonableness” analysis. Until then, in homage to Auguste Rodin’s famous “Thinking Man” sculpture, employers and human resources professionals may want to put their heads in their hands and think…while sitting, of course.
Navarro v. Encino Motorcars, LLC, is a wage and hour case brought by five service advisors who worked at a California automobile dealership, seeking overtime pay under the Fair Labor Standards Act (FLSA) and state law. The dealership obtained dismissal of the FLSA claims, citing FLSA section 13(b)(10), which exempts from federal overtime “any salesman . . . primarily engaged in selling or servicing automobiles or trucks.” But last March, the Ninth Circuit Court of Appeals reversed the dismissal and held that service advisors do not qualify for the exemption. Its decision was notable because it reversed more than 40 years of case law, and even previous Department of Labor (DOL) interpretations, holding that service advisors qualify for this exemption because they are sales personnel who are primarily engaged in servicing automobiles. The Ninth Circuit’s principle rationale for finding the exemption inapplicable was a recent change by the DOL in its interpretation of the exemption to exclude service advisors. The Ninth Circuit held that because the DOL is the agency charged with interpretation of the FLSA, its interpretation of an ambiguous statute is entitled to deference.
The dealership then petitioned the U.S. Supreme Court for certiorari review. Given the widespread impact of this decision on the industry, which has depended on the exemption for decades, the petition was supported by amici curiae (friends of the court) National Automobile Dealers Association (NADA), California New Car Dealers Association (CNCDA), and automobile dealers associations in each of the other states in the Ninth Circuit, who filed a brief urging the Supreme Court to review the case. On January 15, 2016, the Supreme Court agreed to review the Ninth Circuit’s decision. The Supreme Court’s grant of certiorari likely signals its skepticism of the Ninth Circuit’s decision, particularly given the long history of industry reliance on the exemption. Stay tuned.
Felicia Reid of Hirschfeld Kraemer represents amici NADA, CNCDA and the other dealer associations in the Supreme Court proceedings.
The California Court of Appeal provided employers with a small New Year’s gift for 2016: on January 14, in Alvarado v. Dart Container Corporation of California, it affirmed that an employer’s formula for calculating overtime, based upon federal law rather than upon a formula in the California Department of Labor Standards Enforcement (DLSE) Manual, was lawful. Continue reading
It’s that time again – a new year means new laws and regulations for California employers. Below we summarize new legislation that will affect employers doing business in California. Unless otherwise indicated, the new laws below went into effect starting January 1, 2016. Continue reading
This week, California Governor Jerry Brown signed into law an amendment to the Healthy Workplaces, Healthy Families Act of 2014, a law passed last year which requires employers to provide paid sick leave. The law has been incredibly confusing for California employers and the amendments were designed to correct some of the more obvious drafting errors in the law. The major changes are described below. Continue reading
The U.S. Department of Labor (DOL) has recently taken a firm stance on two of the most controversial issues facing American employers: overtime compensation and misclassification of employees as independent contractors. These controversial actions are likely to spark tremendous debate. Employee advocates have already touted the hope that raising salaries and income levels will close the gap of income inequality, a major theme in the upcoming presidential campaign. At the same time, employers are likely not only to challenge the DOL’s process in implementing these changes (a tactic which has been successful in the past), but also to question their lasting effect on the workplace, specifically maintaining that these changes will cost jobs rather than raise salaries. Continue reading