The federal Department of Labor, which is charged with administering and enforcing the Fair Labor Standards Act, announced last month that it is ending its decades-old practice of issuing opinion letters explaining how the federal wage and hour law applies to specific scenarios faced by employers. The DOL instead will issue occasional broad pronouncements called 'Administrator Interpretations' that will summarize the agency's 'general interpretations' of the FLSA, but will not explain how the law applies to specific facts.
The DOL's change of course comes at a particularly bad time for employers. The FLSA, which establishes federal minimum wage and overtime requirements, is more in fashion now among plaintiff attorneys than at any time since it was passed in 1938. Federal court statistics show that the volume of FLSA cases grew almost 13 percent between 2008 and 2009 alone. Many of those cases were 'collective actions' brought by large groups of employees. Such cases can be lucrative to plaintiff's attorneys and devastating to employers.
Meanwhile, the DOL has stepped up its enforcement of the FLSA by adding hundreds of compliance officers since the beginning of the Obama administration, and has requested funding to add more. DOL investigators have authority to audit employer payrolls to ensure FLSA compliance and issue back pay orders and fines for violations.
Compliance with the FLSA has never been easy. Even after more than 70 years, the statute and regulations remain subject to interpretation in many important respects. Application of FLSA requirements is often difficult and fact-intensive. Even slight factual variations can change how the law applies in similar circumstances.
Perhaps in recognition of these difficulties, the DOL has issued opinion letters for more than 60 years in response to employer inquiries about how the FLSA should be interpreted in specific scenarios. The DOL opinion letters have provided important guidance to employers and courts faced with applying FLSA?s murky mandates. An employer who paid employees in accordance with a DOL opinion letter had a significant defense that could relieve liability for back pay and damages.
As of March, the DOL had not issued any opinion letters since the change in presidential administrations in January, 2009. The only action the Obama DOL had taken on opinion letters was to withdraw 'for further consideration' several that were issued during the waning days of the Bush administration, with the promise that the agency would provide a further response in the near future. Now, it appears that the issues addressed in those opinion letters, as well as the questions posed in the backlog of more than 400 pending requests for opinion letters, will go unanswered.
The DOL says that the more general interpretations it will provide in its Administrator Interpretations 'will be a much more efficient and productive use of resources than attempting to provide definitive opinion letters in response to fact-specific requests submitted by individuals and organizations, where a slight difference in the assumed facts may result in a different outcome.' Although the DOL says it will continue to respond to requests for opinion letters, it will do so not by providing opinions, but instead ?by providing references to statutes, regulations, interpretations and cases that are relevant to the specific request but without an analysis of the specific facts presented.?
In effect, the DOL has shifted its resources away from assisting employers and toward enforcing the FLSA on behalf of employees. The decision to discontinue opinion letters will leave to the courts the interpretation and evolution of federal wage and hour law. Its practical effect will be to deprive employers of an effective defense in wage and hour litigation and an avenue for much-needed official guidance in applying a critical but difficult law.
It is more important now than ever for employers to ensure their pay practices are compliant. Now is the time to examine routine problem areas such as employee classification, overtime calculation, determination of hours worked, meal and break time issues, and recordkeeping practices. An effective self-audit can help address any wage and hour deficiencies before the investigator or process server comes knocking on your door.