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Wanted: Overworked Manager Who Can Expand Trump Overtime Rule

Dec. 10, 2019, 11:02 AM

Workers’ rights lawyers planning to sue the Trump administration over a new overtime pay rule may have to walk a legal tightrope: They want to challenge the regulation without harming more than a million employees who could see a pay bump thanks to the rule.

Unions and advocacy groups are throwing out the typical playbook, in which they sue ahead of time to block a regulation from going into effect. Instead, the plan is to wait for the new overtime regulation to hit the books, gauge how employers respond, and select plaintiffs and file a lawsuit, according to interviews with multiple attorneys involved in the plans.

The challenge is how to get a court decision that ultimately would allow the new overtime standard to be improved upon through the regulatory process, rather than eliminated outright. That includes finding the right plaintiffs and selecting the best court in which to challenge the rule.

“You find a Dollar General assistant manager who is working 60 to 70 hours a week and is being paid this relatively low salary, that’s a pretty good plaintiff to have,” said Michael Hancock, a former DOL official who now represents workers at plaintiff’s firm Cohen Milstein.

The legal strategy “needs to happen in a way that’s careful and thought-out and deliberate,” Hancock said. “I think you’re going to see people who are working diligently to find the right opportunity to challenge this, and once they do that I think you’re going to see lawsuits filed.”

The informal coalition seeking to strengthen overtime pay requirements, which the National Employment Law Project is spearheading, views the Trump administration’s regulation as a weakened version of an Obama-era rule that would’ve extended overtime wages to about three times more workers.

The final rule the Labor Department issued in September will set an annual salary threshold of $35,500 below which workers are entitled to overtime when they exceed 40 hours in a week. That will make some 1.3 million additional employees overtime eligible compared with the standard enforced today, with its $23,500 salary threshold that was last updated in 2004.

The lawsuit being planned would argue the rule is “arbitrary and capricious” under the Administrative Procedure Act, and should be rewritten to be more in line with the Obama Labor Department’s 2016 rule. That regulation would have set the threshold at $47,500, covering about 4 million more people than the currently enforced standard.

“The Department is looking forward to its Overtime Rule going into effect to ensure more than a million Americans receive overtime protections,” a DOL spokeswoman said in a statement. The spokeswoman didn’t address questions about the potential lawsuit.

Search for Employee Plaintiffs

Advocates from NELP and other organizations are reviewing prospective plaintiff candidates to find workers to present the most compelling examples of being wronged by the Trump Labor Department’s regulation.

To some lawyers who oppose the new rule, the ideal plaintiff would be someone who works long hours, including in non-managerial duties, and won’t qualify for time-and-a-half under the Trump administration’s rule but would’ve received overtime wages under the more expansive Obama-era proposal.

Prospective plaintiffs already are surfacing, but lawyers can’t fully vet their circumstances until the regulation takes effect. That’s when workers will know how their bosses are complying with the new standard, said Patricia Smith, a senior counsel at NELP who was the Labor Department’s top legal official during the Obama administration.

Plaintiff’s attorneys are considering an array of factors as they prepare to head to court. All plaintiff’s lawyers need to do to prevail in court is to get one federal judge to agree that the DOL’s latest regulation is “arbitrary and capricious.”

The arguments in each legal challenge will generally center on the theory that the DOL is denying time-and-a-half to the exact type of workers Congress had in mind when it set an overtime premium in the Fair Labor Standards Act—employees who work long hours and spend substantial time on menial tasks that could be assigned to others if additional staff were hired.

Advocates could point to the methodology and regulatory record established in the 2016 rule, and argue the DOL cited insufficient reasons in its latest rule for abandoning that earlier process under the Obama administration.

“There are people who are going to be particularly worse off, and those people are certainly potential plaintiffs,” said Adam Pulver, an attorney at Public Citizen who worked in the DOL solicitor’s office during the Obama administration. Pulver was referring to employees who will remain exempt from overtime under the Trump rule because they earn more than $35,500, but would’ve benefited from the Obama rule because they’re paid less than $47,500.

Messing with Texas?

The current regulation came partly in response to a Texas judge’s concern that the 2016 rule’s threshold of $47,500 was unreasonably high. But the administration also acknowledged that the 2004 level of $23,500 is outdated because of the current cost of living.

That 2016 ruling, from federal District Judge Amos Mazzant, also could present a hurdle for plaintiffs.

In blocking the Obama rule, Mazzant found the department focused too much on workers’ salaries—rather than on their job duties—as it sought to update the overtime exemption. He also questioned whether the agency even had the authority to establish a salary threshold.

Some lawyers have posited that any lawsuit runs the risk of yielding a Mazzant-inspired decision that DOL must avoid salaries altogether when regulating an overtime exemption. That outcome would irritate workers and businesses alike because it would require an individual analysis of each worker’s specific job duties to determine overtime eligibility.

Even management attorneys who support the new rule and find it legally defensible say it’s difficult to predict the outcome of any lawsuit challenging it.

“It’s a roll of the dice in some ways, and there are many federal judges out there,” said James Plunkett, senior government relations counsel at management firm Ogletree Deakins in Washington. “Even though I think that it’s pretty firm from a legal perspective, you never know what a judge might think.”

The new rule leaves intact the duties test, which exempts workers from overtime if their primary responsibilities involve supervisory functions or require advanced knowledge, provided they also earn more than the minimum salary level. Employers frequently consider the separate duties test to exempt assistant managers from overtime pay, even though those managers may perform many of the same duties as their hourly subordinates.

However, the duties test doesn’t draw a bright line like the salary threshold does. This has led to varying judicial interpretations and a proliferation of class actions in which plaintiffs allege they’ve been misclassified as supervisors exempt from overtime pay when in fact they spend much of their week performing such routine, non-supervisory tasks as cleaning, running a cash register, or stocking shelves.

“We’re looking at all of the jobs that will be impacted by the rule, and then what the employers are going to do with the rule,” said Catherine Ruckelshaus, general counsel at NELP. “There’s already violations and lack of compliance right now under the existing laws, but we’ll just have to wait and see what the impacts are on workers after January 1.”

The enjoined Obama-era rule also didn’t revise the duties standard, but it sought to boost the salary level so high that the complicated duties test would have had less applicability.

The Venue Question

Advocates planning litigation also face a challenge in selecting a court in which to file suit. Just as business groups found a judge in the conservative-leaning federal courts of Texas to enjoin the 2016 rule, plaintiffs lawyers will be looking to file in a jurisdiction that tends to rule more often for workers over businesses.

But filing in the blue states of New York or California is likely off-limits because workers there are already subject to higher salary thresholds under state laws. As a result, a plaintiff from either state would lack standing because they won’t be denied overtime pay by the Trump regulation.

Smith, the DOL’s top legal official under the Obama administration, said she was not concerned with the risk that a lawsuit would force a judge to vacate the rule, harming workers earning between $23,500 and $35,500 who would become newly eligible for overtime in January.

A judge could remand the rule for further proceedings—in other words, for DOL to rewrite it but without repealing the $35,500 threshold, Smith said. And even if a judge were to vacate the regulation in one year, employers would be reluctant to backtrack and take overtime away from those workers, she added.

But contemplating the precise language in a judge’s order, she said, might be a tad premature.

“You’ve got to win the lawsuit,” Smith said.

To contact the reporters on this story: Ben Penn in Washington at bpenn@bloomberglaw.com; Hassan A. Kanu in Washington at hkanu@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Lauinger at jlauinger@bloomberglaw.com; Terence Hyland at thyland@bloomberglaw.com

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