Legislatures enact laws and regulations to guide employers' conduct. One such law, the New Jersey Wage and Hour Law (NJWHL), is enforced by the New Jersey Department of Labor (DOL). The DOL will investigate and make a determination on whether an employer's conduct violates the NJWHL, but will also provide guidance to employers in their attempts to comply with the NJWHL. In Branch v. Cream-O-Land Dairy, the New Jersey Appellate Division recently held that an employer's reliance on three separate decisions, issued by three separate DOL officials, failed to establish the "good faith" which would save the employer from liability under N.J.S.A. 34:11-56a25.2.
The Statutory Framework
The NJWHL requires, among other things, that employers pay employees 1½ times their "regular hourly rate" for all hours worked in excess of 40 in a workweek. There are certain exemptions, including the "trucking industry employer" exception. A trucking industry employer is required to pay its employees an overtime rate of not less than 1½ times the minimum wage required by the statute (rather than 1½ times their regular hourly rate).
As part of its statutory scheme, the NJWHL includes a "good faith defense" which bars liability for NJWHL violations:
[N]o employer shall be subject to any liability [for a violation of the NJWHL] . . . if he pleads and proves that the act or omission complained of was in good faith in conformity with and reliance on any written administrative regulation, order, ruling, approval or interpretation by the Commissioner of the Department of Labor and Industry or the Director of the Wage and Hour Bureau, or any administrative practice or enforcement policy . . . with respect to the class of employers to which he belonged. Such a defense, if established, shall be a complete bar to the action . . . N.J.S.A. 34:11-56a25.2 (emphasis added).
The Case Facts
On three separate occasions, the DOL investigated how the employer paid its trucking employees. First, in July 2007, a "hearing and review officer in the DOL's Division of Wage and Hour Compliance" assessed how the employer paid a truck driver. The hearing officer determined that the employer's truck driver met the requirements of the trucking industry employer exception.
Second, in June 2014, a "senior investigator" at the DOL advised the employer via e-mail that "[i]t's been determined that [the employer] falls under the Federal Trucking Guidelines of overtime exemption."
Finally, in April 2017, the Division of Wage and Hour Compliance section chief notified the employer that it did not need to pay its truck drivers more than required under the trucking industry employer exemption. The e-mail from the section chief stated in relevant part that the employer "...is considered a transportation company rather than a dairy. Since the complainant consistently made above 1½ times minimum wage — currently $8.44 — which equals $12.66 — per hour, we did not find the company to be in violation of [the] law at this time."
In November 2016, despite these three prior decisions by the DOL, truck driver Elmer Branch filed a class action alleging the employer failed to pay its truck drivers overtime at 1½ times their regular hourly rate in violation of the NJWHL. The employer moved for summary judgment dismissing the case, arguing that the good faith defense barred any liability because the employer had relied on, and acted in conformity with, the three previous rulings it received from the DOL. In support of its motion, the employer also included a certification from Michael P. McCarthy, the former Director of the Division of Wage and Hour Compliance (with 37 years of service with the DOL), attesting to the qualifications of the three DOL investigators who had issued the rulings to the employer and certifying that the employer "has justifiably and in good faith, relied upon the results of these three (3) investigations as contemplated by" the good faith defense. The trial court agreed with the employer and held that the good faith defense shielded the employer from any liability. As one might expect, the trial court found that those prior rulings constituted an "enforcement policy" as defined in N.J.S.A 34:11-56a25.2.
Branch appealed that ruling and the Appellate Division heard two rounds of oral argument. The Appellate Division also invited the New Jersey Attorney General's Office to participate in the second round. The Attorney General took Branch's side and argued that the three prior DOL rulings did not constitute "an administrative practice or enforcement policy" because they were issued in response to discrete complaints and were not intended to apply to an industry as a whole. The Attorney General also argued that the DOL officials — including the "section chief" —were somehow "subordinate members of the department" and that that fact also undermined the claimed good faith defense.
The Appellate Division agreed with the Attorney General and held that the employer could not avail itself of the good faith defense. The court ruled that the three prior determinations by the DOL did not qualify under the first part of the good faith defense because they were not a "written administrative regulation, order, ruling, or approval or interpretation by the Commission or the Director of the Wage and Hour Bureau."
Turning to the second half of the good faith defense (which was the focus of the appeal), the Appellate Division held that the three DOL decisions did not establish an "administrative practice or enforcement policy" of the DOL. The court found that three rulings that are factually on point, with the same job at the same employer, do not "espous[e] a general policy that applied broadly to a class of employers" because they were in response to three individual employee complaints. The Appellate Division also held that the DOL rulings were issued by "lower-level representatives of the DOL," although it does not explain how a section chief of the Division of Wage and Hour Compliance is a lower-level employee. Likewise, there is no mention in the statutory good faith defense that a certain level of DOL officer/employee (i.e., one above a section chief) must be involved in the requisite enforcement policy. The court also noted that the three prior DOL decisions were subject to administrative appeal — even though no appeal was ever filed and, once again, the good faith defense does not contain any such caveat when it references an enforcement policy. Finally, the Appellate Division ruled that the good faith defense must be "narrowly construed [against its application] in light of the remedial purpose of the [NJ]WHL."
Takeaways for Employers
This decision should alarm New Jersey employers. It would seem that relying on repeated, written guidance from the DOL, including a section chief from the Division of Wage and Hour Compliance, would meet the definition of an enforcement policy and good faith under the terms of the good faith defense. However, the Appellate Division disagrees and has now added additional hurdles that must be met by an employer before qualifying for the good faith defense. Some of those hurdles (such as what level of DOL employee is in fact authorized to establish an enforcement policy) remain unexplained. Thus, employers will likely struggle to abide by this decision until — and if — the New Jersey Supreme Court weighs in.
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