Seyfarth Synopsis: On May 25, 2017, Noah Finkel spoke at our full-day summit about what to expect from the DOL under the new administration. Noah’s forecast: “They say that the policy is the people, and we don’t yet have the people.” We have a Secretary of Labor and an interim Solicitor of Labor, but are still waiting for the President to fill the two most important wage and hour law positions: the Administrator and Deputy Administrator of the Wage and Hour Division (“WHD”). While we wait to see who will be at the WHD’s helm, we should not expect any policy changes from the WHD, but should continue to be vigilant about developments in the courts.
Enforcement Efforts Expected to Remain the Same
WHD, the enforcement arm of the DOL, is not very political and does not tend to change directions when new leaders take over. WHD investigators focus most of their efforts on individual complaints—not on targeted investigations that follow top-down DOL initiatives. This is likely to continue, and we can expect the number of investigations to remain stable. The Obama administration increased the investigator headcount of the WHD from 700 to 1,000, and there is no proposed budget cut that makes us suspect that the headcount will wane. One possible change on the enforcement front: the Trump administration is unlikely to continue the Obama administration’s focus on certain areas (e.g., the hospitality world and fissured industries).
The New Salary Rules Likely to Remain in Limbo for 2017
The new salary rules that would have increased the salary threshold for white collar exempt employees (sometimes referred to as the new overtime rules) are in limbo. The rules, which were set to go in effect December 1, 2016, remain enjoined by a Texas court while the DOL appeals to the Fifth Circuit. The DOL, through the Acting Solicitor of Labor, has requested several extensions on briefing the appeal. We can expect the DOL to continue seeking extensions until at least as long as it takes to fill the Solicitor of Labor position on a non-interim basis and the vacant WHD Administrator positions.
If the Fifth Circuit affirms the injunction, it could invalidate not only the minimum salary level, but the salary basis test as well. Elimination of that test would provide employers and exempt employees with more freedom around schedules and pay. The DOL could also withdraw the rule and retain the old salary rules. If the injunction is overturned and the new salary basis rules remain in place, we expect that WHD may propose a middle ground, g., something higher than the $455 per week set by the old rules, yet lower than $913 per week. For 2017, employers should not expect any new requirements.
Courts Will Drive Changes to Joint Employer and Independent Contractor Tests
We expect courts to be the primary drivers of change affecting joint employment and independent contractor standards. We’ve blogged about expectations of the new Secretary of Labor here, and while the DOL does not actually make the law, its guidance and interpretations can influence courts. The Obama DOL attempted to broaden the employment relationship with respect to both joint employment and independent contractor classification. For example, the Obama DOL changed the joint employment analysis from “actual control” to “right to control.” It also shifted the focus of whether a worker should be classified as an independent contractor away from the degree to which the business controls the work and instead focused on the economic realities of the relationship, while also stating that most workers should be employees (a position we do not believe the new administration will follow, but it remains to be seen).
In this area, most of the risk comes from the courts themselves. Earlier this year, the U.S. Court of Appeals for the Fourth Circuit issued the broadest definition of joint employment that we’ve seen and held that unless two entities are completely disassociated with each other, they are joint employers under the FLSA. To minimize risks, we advise continuing to watch how the courts rule on this issue rather than waiting for new DOL guidance.
Opinion Letters Could Return
A glimmer of hope in the new administration is that WHD opinion letters could return. For decades, these opinion letters provided helpful guidance to both employers and employees in how to comply with the FLSA. The Obama administration stopped issuing WHD opinion letters in 2009. We hope to see a return of these. A return of opinion letters also may present employers an opportunity to receive guidance from a WHD that, when its positions are filled, may be more sympathetic to employers’ positions. This, or other forms of interpretive guidance, could be helpful on a number of technical issues—tip credit rules, the fee basis of payment, or interpretation of the fixed salary for fluctuating hours pay plan—on which the WHD under the Obama administration took unfriendly positions.
We’re Keeping Our Eyes on the Courts
Under the new administration, a lot is left up in the air, but as before, most of the risks come from the courts, and the cases plaintiffs’ counsel file in them. We’ve got our eyes on them and will continue to report on key decisions and other wage and hour developments.