Posted: February 16, 2018
It is well established that certain types of employees are exempt from the overtime protections of the Fair Labor Standards Act (FLSA). However, determining who qualifies under a certain exemption is a bit trickier. As the agency tasked with enforcing the FLSA, employers are likely to turn to the Department of Labor, Wage and Hour Division (WHD) for guidance in how to resolve these types of issues. In fact, the WHD often provides opinion letters explaining how these exemptions play out in the real world. Although it is clear that employers are protected from liability under the FLSA if they acted “in good faith in conformity with and in reliance on” a written agency regulation or interpretation, it is unclear what this means in practice. In a case of first impression, the Sixth Circuit in Perry, et al. v. Randstad Gen. Partner (US) LLC, 876 F.3d 191 (6th Cir. 2017), defined the contours of this protection.
Randstad General Partner (Randstad) is a staffing agency which recruits temporary workers and assigns them to work with other companies. The plaintiffs worked within Randstad’s Troy, Michigan office and performed a wide range of work, including marketing and selling services, recruiting and evaluating workers, overseeing job placements, and other administrative and clerical tasks. This often resulted in these employees working long hours. Because Randstad concluded that these employees fell within the FLSA’s administrative exemption, it refused to pay them overtime. A lawsuit soon followed. Randstad, among other things, defended its finding on the grounds that it had relied on a 2005 WHD opinion letter in making this determination and should be immune from liability. The trial court agreed.
On appeal to the Sixth Circuit, the Court first agreed that the FLSA does protect certain types of reliance on written agency interpretations of laws. However, the court found that it had never passed on what constitutes “in good faith in conformity and in reliance on” a written agency regulation or interpretation as provided for under the FLSA. Since the issue of reliance was undisputed by the parties, the analysis turned to the meaning of “in good faith” and “in conformance with.” According to the court, good faith requires the employer to have “no knowledge of circumstances” which would cause a reasonable person to inquire further into whether they really fall within the scope of the guidance. To satisfy the “in conformance with” component, the guidance “must provide a clear answer to the particular situation . . .” The court further clarified that merely satisfying one of these elements is not enough to trigger the defense.
Applying this rule to the present case, the court found the employer did not make the cut. First, while the 2005 WHD letter provided a certain number of “specified circumstances and facts” that placed the employees in the letter within the administrative exemption, Randstad’s employees did not share the same work duties and, thus, did not fall within these “specified circumstances and facts.” As a result, the WHD letter “did not provide a clear answer to the particular situation faced by Randstad.” Second, the court found that Randstad had not acted in good faith because it failed to look at the widely varying job duties of each individual employee and instead classified its employees on a national basis. This variance, according to the court, would put a reasonable person on notice that further inquiry was needed into the specific job duties performed by each employee in question and whether they, in fact, were consistent with the guidance. As such, the court found Randstad had failed to have relied “in good faith” on the WHD guidance.
Aside from defining the contours of the good faith reliance defense, Randstad serves as a warning to employers who fail to take steps to determine whether their employees properly fall within the scope of an administrative guidance. An employer is not permitted to merely assert that it relied on an agency interpretation for its action with impunity. Before the good faith reliance defense is triggered, the employer must take reasonable steps to ensure that the guidance actually applies to each employee.
Please contact the Masud Labor Law Group should you have any questions over whether one of your employees is exempt from the FLSA.