Hunton Employment & Labor Perspectives

On May 19, 2020, the US Department of Labor (“DOL”) issued its final rule likely expanding the FLSA’s Section 7(i) overtime exemption for commission-based workers in retail and service industries by withdrawing the long-standing, historical list of businesses that the DOL identified as falling within or outside of what it deemed to be a retail or service establishment.

As we previously reported, the Department of Labor (“DOL”) issued a proposed rule expected to significantly increase the number of employees who are eligible for overtime. Most notably, the proposed rule seeks to increase the minimum salary threshold for exempt workers from the current level of $23,660 to $50,440.

In a December 16, 2015 interview with Bloomberg BNA, Secretary of Labor Thomas Perez stated he was “confident” that the final rule would be “out by the spring of next year.” This prediction falls ahead of other recent DOL estimations. In its latest regulatory agenda, released in November, the DOL’s Wage and Hour Division estimated that the final rule would be published in July of 2016. And while speaking on a recent panel at the American Bar Association’s Labor and Employment Law conference in Philadelphia, Solicitor of Labor M. Patricia Smith predicted that the new rule was not likely to appear before “late 2016.”

President Barack Obama is expected today to direct the Department of Labor to revise its wage-payment regulations so that more workers will receive overtime compensation. 

Currently, the Fair Labor Standards Act provides an overtime exemption for categories of salaried employees who receive at least $455 a week.  President Obama intends to increase the weekly $455 salary threshold so that employers must pay affected employees a higher salary, cut their hours, or pay them overtime for work in excess of 40 hours a week.

Following the Supreme Court’s game-changing decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011), courts have struggled to determine the level and nature of proof a class plaintiff must present at the class certification stage. This is especially so when it comes to the requirements related to commonality: that there be questions of law or fact common to the class and that the common questions predominate over any questions affecting only individual class members. Fed. R. Civ. P. 23(a)(2), (b)(3). Recently, Chief District Judge George King of the Central District of California refused to certify a wage-and-hour class on the ground that plaintiff was unable to establish commonality. See Pedroza v. PetSmart, Inc., No. ED CV 11-298-GHK (DTBx) (C.D. Cal. Jan. 28. 2013) (minute order).  This detailed order offers many great lessons for wage-and-hour actions brought on a class basis.

On June 18, 2012, in Christopher, et. al. v. SmithKline Beecham Corp., the United States Supreme Court issued its first decision interpreting the so-called white collar exemptions under the Fair Labor Standards Act and finally resolved the circuit split over whether pharmaceutical sales representatives are exempt as outside salespeople.  This decision is not only a long-awaited victory for the pharmaceutical industry, but also a key win for employers in all industries. In Christopher, the Supreme Court held that pharmaceutical sales reps qualify for the outside salesman exemption and are not entitled to overtime wages. The Court also unanimously rejected the U.S. Department of Labor’s (“DOL”) attempt at back-door regulation through an amicus brief, delivering a blow to the DOL’s recent enforcement campaign.

On July 8th, partially relying on the U.S. Supreme Court’s June 20th decision in Wal-Mart Stores, Inc. v. Dukes (for an analysis of the Dukes decision, see our previous blog entry), the United States District Court for the Northern District of California decertified a class of current and former store managers who alleged that Dollar Tree Stores Inc. had misclassified them as exempt employees and denied them overtime pay.  The case, Cruz v. Dollar Tree Stores, Inc., proves that although Dukes involved discrimination as opposed to wage and hour claims, the rationale in Dukes can also be used to defeat wage and hour class actions.

Employers who hold their breath and declare an employment position as “exempt” from the Fair Labor Standards Act’s overtime previsions − all the while knowing that the exempt v. non-exempt question is a close call − should take a simple step to save themselves substantial damages should a court later rule the position non-exempt.

When entering into an employment arrangement with the employee, the employer should obtain the employee’s acknowledgement in writing that the employee’s weekly hours may fluctuate, and that each weekly portion of the employee’s annual salary will constitute payment for all hours worked during that week.