Trump Names New Nominee for Secretary of Labor

Posted in Trump Administration

Yesterday, President Trump’s then nominee for Secretary of Labor, Andy Puzder, withdrew his nomination ahead of his confirmation hearing given the increasing opposition to his nomination by both parties. Less than 24 hours later, President Trump announced Alexander Acosta as his new choice for Secretary of Labor. Mr. Acosta is currently the dean of Florida International University College of Law but has experience in both the public and private sector. Some of Mr. Acosta’s prior positions include being appointed by President George W. Bush to serve as a member of the National Labor Relations Board, his appointment to the role of Assistant Attorney General for the Civil Rights Division of the Department of Justice, and a high profile role as U.S. Attorney for the Southern District of Florida. If confirmed, Mr. Acosta will be the first Hispanic member of President Trump’s cabinet.

It’s too early to tell what type of agenda we could see from the DOL if Mr. Acosta is confirmed but he likely will be a little more worker-friendly than Mr. Puzder. We will continue to update you as more information becomes available regarding Mr. Acosta.

Trump leaves DOL OT rules on life support - For Now

Posted in *New Exemption Rules, Trump Administration

President Trump has had a busy week since his inauguration: ordering construction of a wall, starting to unwind the ACA, arguing with the media about how many people attended his inauguration – the list goes on. One thing that he has not yet gotten to is the U.S. DOL’s stalled overtime exemption rules. Right now the rules remain in limbo, temporarily suspended by order of a U.S. District Court in Texas. That order is now on appeal to the 5th Circuit Court of Appeals. Earlier this week, the Department of Justice, representing the DOL in the case, asked the 5th Circuit to extend the due date for the government’s brief in the appeal by 30 days “to allow incoming leadership personnel adequate time to consider the issues.” The coalitions of states and business groups opposing the new rules, not surprisingly, did not oppose that request.

While the new administration has not yet taken an express position on the issue, President Trump has railed against regulations seen as hampering business, and he nominated a vocal critic of the rules, fast food CEO Andy Puzder, to lead the Department of Labor. However, because the rules were passed through a process of “notice and comment” rulemaking, the Trump Administration cannot simply reverse them with the stroke of a pen without going through the same lengthy process of publishing proposed rules, seeking public input, and then issuing final regulations. One way to avoid that process would be to direct the Department of Justice to drop its defense of the pending lawsuit and admit that the rules were improper, allowing the court’s injunction to become final. However, even that might not be the end of the story, as the AFL-CIO has asked for leave to step in and defend the final rules should the government try to bow out.

In short, employers are still stuck right where they’ve been since November. The rules are on life support and it’s likely that the Trump Administration or Congressional Republicans will pull the plug in one way or another sometime soon. But we don’t know exactly when, and we can’t yet completely rule out the possibility of an unexpected recovery that would allow the rules to take effect – possibly retroactive to December 1, 2016.

For more on how changes ushered in by the new administration will affect the workplace, check out our firm’s Navigating Change portal. 

So Long, Secretary Perez: DOL Head's Goodbye Message

Posted in State Regulation, Trump Administration

Last week, outgoing Secretary of Labor Thomas Perez released a farewell “Memorandum to the American People.” It mostly reads as a recap of the DOL’s news releases over the past several years, touting various DOL initiatives and advocating for further changes, like increasing the minimum wage and mandating paid family leave. The memo must strike a bittersweet note for proponents of the current DOL’s direction. One can pretty safely infer that most of the progressive proposals discussed in the memo – other than perhaps some form of paid maternity leave – are going precisely nowhere under the incoming Trump administration. To the contrary, most observers expect the DOL to roll back many Obama-era changes under the leadership of Trump’s pick for labor secretary, fast-food executive Andy Puzder. If, that is, Congressional Republicans don’t beat them to the punch.

That reality is certainly what prompts the most interesting part of the farewell memorandum, which is its repeated references to action at the state and local levels. For example, the memorandum lauds the fact that 18 states have increased their minimum wages since President Obama called for a minimum wage hike in 2013. It also applauds new state and local family and sick leave laws, noting that the DOL has supported state and local action through “several rounds of paid-leave analysis grants to hep state and local officials examine the feasibility of establishing or expanding paid leave policies.”

Secretary Perez goes on to encourage state and local governments to continue this trend:

While we wait for Congress to act, City and state governments should continue their progress in these areas, and voters should continue to exercise their voices in favor of higher wages and more supportive workplace policies, as voters in several states did this year.

In this area at least, Secretary Perez is likely to get his wish, at least in certain parts of the country. This is a legal blog, not a political one, so I’ll leave the debate over whether paid leave and increased minimum wages are good public policy to the economists and politicians. What I can say with some degree of certainty is that this growing patchwork of state, county and city mandates is making things more complicated for employers. Greater complexity means greater opportunity for errors, greater legal risk, and higher legal costs. All of this may or may not benefit workers and the economy, but it’s at least good news for employment lawyers.

OT Exemption Rules Lawsuit Will Proceed Despite Appeal

Posted in *New Exemption Rules, Litigation

Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas has decided that he will not halt the lawsuit challenging the U.S. DOL’s new overtime exemption rules pending a ruling from the 5th Circuit Court of Appeals on his earlier order temporarily blocking the rules from taking effect.

Here’s a quick recap of where things stand and what this means:

On November 22, the District Court granted a nationwide preliminary injunction blocking the rules from taking effect on December 1. This was not a final ruling in the case, but in order to grant the injunction, Judge Mazzant had to find that the states and business groups challenging the rules had a “substantial likelihood of success on the merits of their claims.”

On December 1, the DOL appealed the District Court’s ruling to the 5th Circuit Court of Appeals. Briefing in that appeal is scheduled to be completed by the end of January, with oral argument shortly thereafter. Assuming, that is, that the Trump Administration doesn’t direct the DOL to withdraw the appeal upon taking office. If that happens, the AFL-CIO could step in to defend the rules if the court grants its motion to intervene.

Because the ruling on appeal was not a final judgment in the case, the default rule is for the lawsuit to move forward in the District Court even while the preliminary injunction is being challenged on appeal. However, the District Court has discretion to stay the lawsuit until the Court of Appeals rules. The DOL asked the District Court to do just that, hoping that it might fare better in the Court of Appeals than it did in the preliminary injunction ruling. Judge Mazzant rejected that motion, finding that the DOL’s motion failed “present a substantial case on the merits” demonstrating that the preliminary injunction was improperly issued. Once again, this is not a final ruling on the merits, but like the initial ruling on the motion for preliminary injunction, it does seem to signal that the judge does not think highly of the Department of Labor’s position in defense of the new overtime rules.

So now what? The District Court could issue its final ruling on the merits of the lawsuit at any time. If it does so before the 5th Circuit rules on the motion for preliminary injunction, it may re-start the appeal process. Of course, the Trump administration may direct the DOL to withdraw its defense of the new rules before the courts decide the issue (and the court could deny the AFL-CIO’s motion to intervene), or Congress may short-circuit the whole process by taking action to block the rules. In short, not much has changed since before the holidays.

 

Penn Students Seek Rehearing, DOL Files Brief in OT Rules Appeal

Posted in *New Exemption Rules, Higher Education, Litigation

Just a quick update on a couple of our recent stories for you wage and hour litigation junkies:

Back on December 5, a three-judge panel of the 7th Circuit Court of Appeals affirmed dismissal of a case in which two former University of Pennsylvania student athletes claimed that they and other intercollegiate athletes were employees entitled to minimum wage under the FLSA. (Read our prior post on the decision for more information.) Undeterred, the students are now asking the full 7th Circuit to rehear their case. They argue, among other things, that the district court and the appellate panel erred in dismissing their complaint without allowing them to develop a factual record to support their claims.

The litigation over the FLSA overtime exemption rules marches on. (See the *New Exemption Rules section of the blog for the complete history.) The U.S. Department of Labor filed its initial brief yesterday, December 15. Briefing will continue through January, with a decision in late February or early March at the earliest. Assuming, that is, that the Trump administration and Congress don’t pull the plug before then.

AFL-CIO Seeks To Intervene In Overtime Rules Court Fight

Posted in *New Exemption Rules

The pending court fight between the U.S. DOL and a coalition of states and business groups over the new overtime exemption rules will not be resolved before President Obama leaves office in January, even though the 5th Circuit Court of Appeals has now granted the DOL’s motion to set an expedited briefing schedule on its appeal from a preliminary district court order blocking the rules from taking effect. While we don’t know for sure what position the Trump administration will take on the new rules, the nomination of fast-food executive Andy Puzder as Secretary of Labor seems to be a pretty clear sign. Puzder has been a vocal critic of the new rule.

Anticipating that the DOL will be less than vigorous in its defense of the rule once President Trump takes office, the Texas AFL-CIO has filed a motion to intervene in the lawsuit so that it can carry on in the DOL’s place should the administration change its position. The court has yet to rule on the motion, so we don’t know whether the labor organization will be permitted to defend the new rule in court.

For those taking bets, this somewhat increases the odds that the rules may take effect at some point notwithstanding the results of the election. However, there are still multiple ways in which they might be permanently blocked. At this point, the only sure bet is that employers will be stuck in limbo for at least the near term.

Seventh Circuit Says Student Athletes Are Not Employees

Posted in Higher Education

iStock_000015026880XSmall.jpgBack in August, the National Labor Relations Board threw the higher education community a curve ball ruling that student assistants at Columbia University were employees under the National Labor Relations Act, and were therefore entitled to organize a union. (For more information see our alert on the case.) An obvious question left unanswered by the Columbia University case was whether and under what circumstances students may also be entitled to minimum wage and overtime under the Fair Labor Standards Act. On Monday, December 5, the Seventh Circuit Court of Appeals weighed in on at least part of that issue, holding that two former University of Pennsylvania athletes were not employees of either the University or the NCAA under the FLSA. Berger v. National Collegiate Athletic Association, et al.

Historical Context

The FLSA itself is distinctly unhelpful in assessing when students might be treated as employees, as it defines “employee” as “any individual employed by an employer,” and “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” The statute goes on to define “employ” as “to suffer or permit to work.”

Taken literally, that exceedingly broad definition would seem to sweep in all students who perform anything one could describe as “work.” That could include, for example, students who build sets in the drama department, run the student radio station, or do research work as part of a graduate program. However, the U.S. Supreme Court long ago rejected such a sweeping interpretation of the FLSA, holding in Walling v. Portland Terminal Cothat the FLSA “cannot be interpreted so as to make a person whose work serves only his own interest an employee of another person who gives him aid and instruction.”   Continue Reading

Exemption Rules Appeal Won't Be Resolved Before Obama Leaves Office

Posted in *New Exemption Rules, Litigation

It looks like the U.S. Department of Labor’s appeal of the order blocking the new overtime exemption rules won’t be decided before President Obama leaves office. Under the Court of Appeals’ regular rules, the DOL’s opening brief would have been due in mid-January, followed by the response brief 30 days later, and the DOL’s reply 14 days after that, likely taking the briefing process into March. Last Friday, December 2, the DOL filed a motion asking the Court of Appeals to set an expedited briefing schedule, under which the DOL would file its initial brief by December 16, and all briefing would be completed by February 7, 2017. The DOL’s motion further asks the Court of Appeals to set a date for oral argument on “the first available date after close of briefing.”

In short, even under the DOL’s proposed expedited schedule, this appeal would not be resolved until well after January 20, 2017, when Donald Trump will be sworn in as President. While we can certainly speculate that President Trump may pull the plug on further efforts to defend the new rules in court, we don’t know what the new administration will do on this issue once it takes office. There are also still other wild cards that could be played before this drama is over. Congress could step in and overrule the DOL, or the District Court could issue its final ruling on the merits of the case, which could re-start the appeals process regardless of which way the decision goes.

For our thoughts on what employers should do while this all plays out, see our prior post here.

 

Not Dead Yet! DOL to Appeal Overtime Exemption Rules Injunction

Posted in *New Exemption Rules, Litigation

Sorry employers, the ride’s not over yet. For those of you keeping track, the U.S. Department of Labor’s new overtime exemption rules were set to go into effect yesterday, December 1, 2016. However, on November 22, 2016, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction blocking the rules from taking effect. It probably should not come as much of a surprise that the DOL is not simply rolling over on this issue. Yesterday, the DOL filed its official Notice of Appeal, taking the case up to the Fifth Circuit Court of Appeals. Our prediction meter is seriously out of calibration after the events of the last month, so we’re not going to attempt to handicap the DOL’s chances on appeal, at least not at this early stage. And let’s not forget, even if the DOL succeeds in its appeal, the forthcoming Trump administration and the Republican-controlled Congress may well take steps to block or change the rules once President Obama leaves office in January.

So, what should employers do now? For the time being, nothing really has changed. The injunction blocking the new rules remains in effect until the District Court or the Court of Appeals says otherwise. However, the injunction could be lifted at any time. If that happens, the rules will take effect. Arguably they will be effective retroactively to December 1, notwithstanding the injunction that is currently in place. This leaves employers who have exempt employees with salaries below $913 per week in an awkward spot. Those who have already implemented changes to comply with the new rules should strongly consider staying the current course at least until the dust settles and the litigation is resolved. Employers who have not implemented changes have to weigh the cost and of doing so now against the risk of having to retroactively pay overtime should the injunction be lifted, even if the result is only a temporary reprieve. At a minimum, employers may wish to minimize any overtime work by potentially affected employees and ensure that they are accurately tracking work hours.

We will report on further developments as they occur.

New Exemption Rules Blocked - Now What?

Posted in *New Exemption Rules

Yesterday, the United States District Court for the Eastern District of Texas dealt employers yet another surprise in this season of upsets with its decision in State of Nevada v. U.S. Department of Labor, halting the implementation of the DOL’s new FLSA overtime exemption rules, which were set to take effect December 1, 2016. The rules would have increased the minimum salary for exempt executive, administrative and professional employees from $455 per week to $913 per week, or about $47,476 per year. The court issued a nationwide injunction prohibiting the enforcement of the new salary threshold for exempt employees. As a result of the court’s ruling, the new rules will not take effect on December 1, the prior rules will remain in effect, and the timing of a change in the rules, if any, is completely up in the air.

While the new rules already faced an uncertain future under the Trump administration and the Republican-controlled congress, most legal observers gave this lawsuit a low probability of success. The complaint, filed on September 19, 2016 by a coalition of 21 states, claims that the DOL exceeded its authority under the FLSA and unlawfully infringed upon states’ budgets by enacting the new rules. A coalition of business groups led by the U.S. Chamber of Commerce also filed a parallel lawsuit, which was later consolidated with the states’ case. The states asked the court to grant a preliminary injunction blocking the rules from taking effect until a final ruling in the case. For their part the business groups asked the court to skip the preliminaries and expedite its final ruling on the merits.

Although the court declined to issue a final decision for the time being, it granted the states’ motion for a temporary nationwide injunction blocking the new rules from taking effect and prohibiting the DOL from expending any resources to enforce them. The court found that Congress intended for the executive, administrative, and professional exemptions to be based on an employee’s actual duties and responsibilities, rather than the employee’s salary. By issuing a rule that “categorically excluded” employees who performed exempt job duties from exemption based on a “de facto salary-only test,” the court determined that the DOL exceeded its authority and violated the unambiguous intent of Congress to exempt employees based upon the type of work they perform. While the Court’s ruling seems to suggest that the low $455 per week salary threshold in the existing rules might be permissible because it screens out only “obviously non-exempt employees,” the court did not address whether a smaller increase in the current minimum might have been permissible. It also did not rule on whether that lower minimum salary threshold could be subject to automatic increases as the DOL had proposed, finding instead that “because the Final Rule is unlawful, the Court concludes the Department also lacks the authority to implement the automatic updating mechanism.”

Importantly, this ruling is not limited to the States that filed the lawsuit. The Court’s ruling is nationwide in scope and applies to all employers covered by the FLSA. However, much uncertainty remains. Rulings on preliminary injunctions are subject to immediate appeal. While it is rare for the Fifth Circuit Court of Appeals to overturn a preliminary injunction, this is an unusual and unexpected decision, and the Obama Administration may well try its luck in a bid to preserve the new rules. While its ruling on the preliminary injunction likely forecasts the district court’s final ruling on the merits of the case, it is also possible that the court may reach a different result upon final review and lift the injunction.

We also do not know at this time exactly what President-elect Trump will do on this issue when he takes office in January. He may well simply order a halt to further government efforts to defend the Obama administration rules, in which case the current injunction will likely remain in effect and the rules will be dead. But the President-elect is nothing if not unpredictable, and it is at least possible (if unlikely) that his populist side may win out over business interests and lead him to defend the new rules. It is also possible that Congress may step into the fray, either by voting to block the new rules under the Congressional Review Act, or by enacting legislation that either does away with the salary increase or phases it in over several years.

This leaves employers with a difficult question: What now? Unfortunately we are still waiting for a definitive answer.

Employers who are contemplating changes to comply with the new rules but have not yet announced them should consider waiting to see what happens before they act. Employers that have already announced or implemented adjustments will need to decide whether to roll them back, and if so whether to do that now or wait for the dust to clear. Employers who do announce further changes based on this ruling should be clear with employees that further changes might follow depending on the final resolution of the lawsuit and the response of Congress and the new administration. Obviously those communications will need to be handled carefully, particularly if they mean rescinding pay increases or other changes that employees may have seen as favorable.

Finally, as employers plan to respond to these issues, they should watch not only the courthouse in Texas and politicians in Washington D.C., but their state legislatures and city councils. New York already has a higher minimum salary for exempt white collar employees ($675 per week), and has recently proposed increases even greater than those in the now blocked federal rules. If the federal rules are declared dead, other state and local governments may be inspired to take similar action.

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