Breaking News from the Department of Labor (DOL)

By Linda H. Evans,
Senior Associate.


It was announced last week that the Obama administration plans to raise the wage requirement used by companies that exempts millions of executive, administrative, and professional workers from overtime and minimum wage. This “white collar” exemption currently applies to those workers who earn more than $455 per week (or $23,660 per year), a level set back in 2004. It is estimated that the new rule will go into effect next year. If so, such workers will have to earn at least $970 per week (or $50,440 per year) to be exempt from overtime. It is expected that the new rule will hit hardest in the retail, restaurant, hotel, and trucking industries.


DOL Acted in Bad Faith


Also last week, the 5th Circuit Court of Appeals found the DOL acted in bad faith in its investigation of a company in Corpus Christi, Texas. The reason for the investigation was to determine whether the workers were really employees or independent contractors, as the company claimed. The DOL found the workers were not independent contractors. The company strongly disagreed with both the DOL’s findings and the manner in which it had conducted the investigation. The Court agreed, stating “at nearly every turn the DOL investigation and prosecution violated the department’s internal procedures and ethical litigation practices.” Among other things, the Court found the DOL only interviewed three employees, destroyed evidence, ambushed a low-level employee for an interview without counsel, and demanded a grossly inflated multi-million dollar penalty. In the litigation portion, the DOL opposed routine motions, refused to produce relevant information, and stone-walled the deposition of its lead investigator, who had little training or experience in contractor misclassification cases. Eventually the DOL admitted to some mistakes, but the Court called it too little, too late! The Court called the DOL’s position frivolous, and now the DOL has to repay nearly a million in legal fees to the company.


And Coming Next Fall…


The U.S. Supreme Court agreed to take on a case to decide whether public-sector unions may require workers who are not members to help pay for collective bargaining. The case was brought by teachers in a teachers’ association in California who argued that being compelled to pay union fees to subsidize activities they disagreed with violated their First Amendment rights. Under California law, public employees who choose not to join a union still must pay a “service fee” to cover costs of collective bargaining, often amounting to more than $1,000 per year per person. The Supreme Court will hear arguments in the case in its next term, which begins in October.


Watch this space for new developments on the above issues.