September 13, 2024 | By: Ellen A. Adams and Gerard M. D’Emlio

Key Takeaways

• Utilize outside counsel to protect wage and hour audits as privileged and confidential;
• Plan ahead for upcoming changes and reclassifications to avoid risk and unanticipated financial impacts;
• Seek legal counsel for other risk mitigation strategies in defending wage and hour class and collective actions.

When the United States Supreme Court junked the 40-year-old Chevron doctrine this past term in its Loper Bright decision, many in the legal community were wondering what the fallout would look like. Loper Bright liberated courts to freshly interpret statutes and eschew deference to agency interpretations, setting the stage for a flood of rulings invalidating regulations across the administrative state. A prime candidate for attack: the Department of Labor’s “Minimum Salary Rule.”

Under the Fair Labor Standards Act (“FLSA”), employers are guaranteed time-and-a-half pay for labor in excess of the standard, 40-hour work week. But there are exceptions, such as the so-called “White Collar” or “EAP” exemption. The FLSA provides that “employee[s] . . . in . . . bona fide executive, administrative, or professional capacit[ies]” aren’t entitled to overtime pay, 29 U.S.C. § 213(a)(1), and the Secretary of Labor “sets out a standard for determining when an employee is a “‘bona fide executive.’” Helix Energy Sols. Grp., Inc. v. Hewitt, 598 U.S. 39, 44 (2023). Current DOL regulations set out a three-part test for answering the “bona fide executive” question:

1. does the employee receive a “predetermined and fixed salary” that does not vary with the amount of work they do in a given day or week (i.e. the “salary basis” test);
2. is their salary above a specified amount? (i.e. the “salary level” test); and
3. does the nature of their job responsibilities fall within the DOL’s characterization of “executive,” exempt work? (i.e., the “duties” test).

Id. at 44–45. In Helix, the Court held a highly-compensated, daily rate employee wasn’t paid on a salary basis, and therefore, qualified for overtime, even though his annual compensation totaled more than $200,000. See id. at 61–62. In dissent, Justice Kavanaugh questioned whether the DOL’s regulations explicating the “bona fide executive” exemption would survive a challenge at all. See id. at 67–68 (Kavanaugh, J., dissenting) (“[I]t is questionable whether the Department’s regulations—which look not only at an employee’s duties but also at how much an employee is paid and how an employee is paid—will survive if and when the regulations are challenged as inconsistent with the [FLSA]. It is especially dubious for the regulations to focus on how an employee is paid (for example, by salary, wage, commission, or bonus) to determine whether the employee is a bona fide executive. . . . I am hard-pressed to understand why it would matter for assessing executive status whether an employee is paid by salary, wage, commission, bonus, or some combination thereof.” (emphasis added)).

Enter the Fifth Circuit (which the Court had affirmed in Helix). In a separate case arising from the Western District of Texas, the circuit faced a direct challenge to the DOL’s authority to “promulgat[e] any rule imposing a salary requirement” for the EAP exemption following Loepr Bright. Mayfield v. United States Dep’t of Lab., — F.4th —-, 2024 WL 4142760, at *1 (5th Cir. Sept. 11, 2024). In 2019, the DOL updated the Minimum Salary Rule to raise the threshold to qualify for the EAP exemption from $455/week to $684/week. Id. The Mayfield plaintiff (a small business owner) sued, arguing not that “DOL lacks the authority to raise the minimum salary, []or . . . that the particular salary level DOL chose [in 2019] is invalid”—but instead arguing the DOL “lacks, and has always lacked, the authority to define the EAP Exemption in terms of salary level.” Id. at *2.

The circuit denied the challenge and rejected, inter alia , the plaintiff’s Loper Bright argument. The circuit pointed out that the FLSA gives the DOL authority to “define” and “delimit” the terms of the EAP exemption. Id. at *4. Cracking open the dictionary, the court read the minimum salary rule as consistent with the DOL’s “statutorily conferred authority” in two ways: (1) the Rule “defines, in part, what it means to work in an executive, administrative, or professional capacity (namely, to earn at least a particular amount of money); and (2) The Rule “delimits” the scope of the Exemption by “set[ting] a limit on what is otherwise defined by the text of the Exemption.” Id. Further, the court took note that the DOL has “consistently issued minimum salary rules for 80 years”—including “immediately after the FLSA was passed”—and while the “specific dollar value required has varied, DOL’s position that it has the authority to promulgate such a rule has been consistent.” Id. at *6. Thus, the Fifth Circuit “join[ed] four of [its] sister circuits in holding that DOL has the statutory authority to promulgate the Minimum Salary Rule.” Id. at *6.

To be sure, the circuit noted the DOL’s power isn’t without limits. For instance, “adding an additional characteristic” defining the exemption “is consistent with the power to define and delimit” so long as it bears a “rational relationship to the text and structure of the statute.” Id. at *5. Characteristics unmoored from the statutory text or “differ[ing] so broadly in scope from the original that it effectively replaces it” would “raise serious questions.” Id. Likewise, while “[u]sing salary as a proxy for EAP status is a permissible choice because . . . the link between the job duties identified and salary is strong,” using a proxy characteristic won’t “always be a permissible exercise of the power to define and delimit.” Id. “If the proxy characteristic frequently yields different results than the characteristic Congress initially chose, then use of the proxy is not so much defining and delimiting the original statutory terms as replacing them.” Id. But the circuit held the minimum salary rule didn’t run afoul of these potential backstops.

The Fifth Circuit’s ruling was hardly a foregone conclusion. It’s no secret that appeals courts typically view agency action of almost any stripe with a jaundiced eye. What’s more, the DOL’s authority to promulgate a minimum salary rule was buffered by legal attacks in Mayfield from all sides, not just post-Chevron statutory analysis. The court, however, rebuffed every one of them.

If any employers awaited making classification or salary adjustments based on a hope that courts would throw out the DOL’s salary basis test post-Chevron, employers should take immediate action and consult legal counsel to get into compliance.

Further, to the extent employers have administrative, executive, or professional employees currently classified as exempt but making less than $58,656.00, employers should engage counsel now to audit the classifications and plan for any reclassifications that will occur when the next increase takes effect on January 1, 2025.

GableGotwals’ Labor and Employment Practice Group is experienced in conducting wage and hour audits and assisting clients in mitigating risk while complying with these changing legal obligations.

¹ DOL is currently considering another update that would raise the salary threshold to $1,059/week. See id. at *1.
² The circuit also rejected challenges based on the major questions and nondelegation doctrines.

Ellen A. Adams 405-235-5520 eadams@gablelaw.com	Gerard M. D’Emilio 405-568-3318 gdemilio@gablelaw.com

This article is provided for educational and informational purposes only and does not contain legal advice or create an attorney-client relationship. The information provided should not be taken as an indication of future legal results; any information provided should not be acted upon without consulting legal counsel.

July 25, 2024 | By: Ellen A. Adams

Since 2022, the Occupational Safety and Health Administration (OSHA) has been focused on heat-related hazards and possible heat-related injuries and illnesses in indoor and outdoor workplaces. As we discussed in this previous Alert, OSHA’s prior focus was through its National Emphasis Program and enforcement of the “general duty” clause. Now, OSHA has proposed workplace regulations designed to protect workers from heat-related illnesses and fatalities, specifically.

Obligations under the proposed regulations are triggered when the ambient air temperature hits 80 degrees Fahrenheit, whether inside or outside. The obligations become more intense when temperatures climb to 90 degrees Fahrenheit. For example, at the initial heat trigger, paid rest breaks must be encouraged and provided when needed. At the second heat trigger, rest breaks are mandatory, must last at least 15 minutes, and must occur at least every two hours.

While there are several exceptions, if these regulations come to fruition, they will have a significant impact on myriad employers and their respective employees. In the post-Chevron deference world and in the midst of an election year at the White House, it is impossible to know whether this proposed rule will become final. However, it’s reasonable to assume OSHA will attempt to continue its enforcement efforts under the general duty clause regardless. In summary, the proposed regulations will require employers to do the following:

• Develop and implement a Heat Injury and Illness Prevention Plan (HIIPP) that includes covered work activities; policies and procedures; methods for measuring and monitoring temperatures; designation of a Heat Safety Coordinator(s); emergency response and planning; and input from non-managerial employees and their representatives, if applicable;
• Provide cool, accessible drinking water;
• Provide one or more readily accessible shaded or air-conditioned break areas for outdoor work sites and an air-conditioned break area for indoor work sites;
• Provide fans, natural ventilation, or barriers from radiant heat sources in the work area for indoor work sites;
• Institute acclimatization protocols for new employees and employees who are returning to work after a leave of more than 14 days.
• Provide rest breaks;
• Institute methods to monitor employees to include either a mandatory buddy system, a supervisory system for groups of no more than 20 employees, or regular two-way communication for employees who are working alone at a site
• Covered employers will be required to train every employee and all supervisors on heat stress hazards, risk factors and warning signs for heat-related injury or illness, the importance and location of water and break areas, all policies and procedures applicable to their work site in general and their specific work duties, and their rights and responsibilities under those policies.
• Employers must repeat training annually and when any change to the work site affects heat exposure, when any policies or procedures change, when a heat-related injury or illness occurs on the job, or when there is an indication that an employee or supervisor is not understanding or retaining the necessary understanding.

Proposed regulations also contain record retention requirements and specify that all compliance should be completed at no cost to employees and that any employee time required for compliance, e.g. training, should be compensated at the employees’ normal rate of pay.

GableGotwals’ Employment & Labor team is committed to helping employers navigate changes in the legal landscape. Please contact any member of the team for further assistance.

Ellen A. Adams 405-235-5520 eadams@gablelaw.com

The author would like to give credit to GableGotwals summer associate, Trisha E. Bunce, for research and assistance in preparing this Alert.

This article is provided for educational and informational purposes only and does not contain legal advice or create an attorney-client relationship. The information provided should not be taken as an indication of future legal results; any information provided should not be acted upon without consulting legal counsel.

June 21, 2024 | By: Christopher Shrock

Five former Directors of the U.S. Patent and Trademark Office recently called on current USPTO Director Kathi Vidal to withdraw proposed changes to terminal disclaimer rules 37 CFR 1.321(c) and (d) (89 FR 40439). Vidal’s predecessors claimed, among other things, that the proposed rule would depart the “normal process of considering each patent claim on its own merits.” What do they mean? Why is this significant?

Currently, terminal disclaimers stop patent applicants from securing rights to their inventions for more than the 20-year limit prescribed by Congress. When a first patent application won’t cover the full scope of an invention, the applicant can file a second or “continuation” application, based on the first application, to pursue rights on the rest of the breakthrough. However, if the USPTO believes that the scope of the second application is “obvious” in view of the first application, the examiner will require the applicant to shorten the life of the patent sought in the second application. You can’t have 20 years on a first “parent” patent plus additional time on a second, nearly-identical “child” patent. So the applicant must submit a disclaimer terminating the child patent whenever its parent would reach its natural end.

The problem with continuation applications, from the USPTO’s point of view, is the potential for abusive redundancies. For example, an applicant with deep pockets could use continuation applications to obtain “multiple patents directed to obvious variants” so that, even if a court or the USPTO later invalidates one patent, the invention will still have protection from the others. And a defendant in an infringement action seeking to escape liability through invalidation (i.e., arguing that the USPTO should never have issued the patent at issue) would have to challenge each and every variant individually—a daunting task for shallow-pockets (89 FR 40439).

The USPTO’s proposal would solve this problem by adding a new function to terminal disclaimers, namely, making child patents depend on their parents for validity. Under the proposed rule, a child patent would become unenforceable if claims from the corresponding parent application were invalidated. The deep-pocketed troll could fire its barrage of infringement claims, but the defendant could escape liability through invalidation of just one patent—the parent. Thus, the rule would try to level the playing field for shallow-pocketed defendants.

Most likely, the proposed rule would make little difference to some patent families, for example, those obtained by the following one-two strategy: quickly obtaining a narrow patent before pursuing a broader, more methodical one. If the claims of the second patent fully eclipse the claims of the first, then, logically, if the first is invalid, so is the second. If you can’t patent a Tyrian purple adamantine cylinder with a hole through one end, then you also can’t patent a more generic metal cylinder with a hole through one end. Thus, the rule would do away with the formality of arguing the broader claim.

But consider another scenario. Suppose a parent patent has two independent claims, for example, (1) a Tyrian purple adamantine cylinder with a hole in one end, and (2) the use of that cylinder as a bathroom doorstop. Also suppose the applicant obtains a child patent, expanding the original claims to cover (1’) the cylinder in various shades of aubergine and (2’) methods applying it to sliding-glass and doggie doors. The USPTO demands a terminal disclaimer for the second patent, which the applicant files. Later, an alleged infringer of claim (2’) uses a Tyrian purple adamantine cylinder with a hole in one end as a doorstop for a doggie door. The patent holder files suit. The defendant, instead of arguing the claim at issue, challenges (1), the device claim from the parent. Under the USPTO’s propose rule, an invalidation of any claim from the first patent renders the second patent unenforceable. Thus, when the court invalidates claim (1), claim (2’) becomes unenforceable, and the defendant prevails—even though no court reviewed claim (2’), or even claim (2). The defendant escapes liability with zero consideration of the infringed claim.

The USPTO leaves no ambiguity about how it intends to apply the rule if adopted. Its Examples 4 and 5 show that any invalidated claim in a parent patent would render every claim from every child patent unenforceable, regardless of relationships among claims. If using a Tyrian purple adamantine cylinder with a hole through one end as a doorstop for a doggie door proved to be the most ingenious and economically efficient innovation of a generation, then the inventor would not reap a reward after the claim for the cylinder itself was invalidated. The applicant and the USPTO’s failure to omit claim (1) from the parent patent would doom the true innovation without direct consideration. Hence, the former directors’ concern to preserve the “normal process,” whereby each claim stands or falls on its own merits.

Arguably, circumventing the “normal process” in the manner proposed by the USPTO threatens to undermine inventors’ statutory rights, which promise enforceable patent rights for new and nonobvious inventions. If so, then the proposed rule may be unlawful. Without the rule, however, the USPTO’s concern about redundant child patents remains unresolved. Perhaps the notice-and-comment procedure will reveal some less radical approaches to the problem. Comments on the proposed rule will close on July 9, 2024.

Christopher Shrock 918-595-4890 cshrock@gablelaw.com

March 15, 2021 | By Chris S. Thrutchley and Ashlyn M. Smith

The U.S. House of Representatives recently introduced and is expected to pass the Protecting the Right to Organize Act of 2021 (the “PRO Act”), which would then proceed to the U.S. Senate for further consideration. The PRO Act has been described by some as “a historic proposal that restores fairness to the economy” and, by others, “a union boss wish list.” Political persuasion aside, the PRO Act is clearly chock-full of new employee protections that employers should be aware of in the event the PRO Act becomes law. One of those protections has to do with class action waivers, which are commonly found in employer-employee arbitration agreements. In short, the PRO Act would make them unlawful.

The PRO Act would accomplish this by amending the National Labor Relations Act (“NLRA”) to expressly override portions of the Federal Arbitration Act (“FAA”), the latter of which the U.S. Supreme Court relied on in its landmark 2018 decision Epic Systems Corp. v. Lewis. The Epic case was a win for employers and ushered in the era of what we previously described as “the new and improved class action waiver.” The PRO Act, it appears, attempts to overrule the Epic decision.

The pertinent language of the PRO Act is straightforward in this regard:

Notwithstanding . . . the ‘Federal Arbitration Act’ . . . or any other provision of law, it shall be an unfair labor practice . . . for any employer—

(1) to enter into or attempt to enforce any agreement, express or implied, whereby prior to a dispute to which the agreement applies, an employee undertakes or promises not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee in any forum that, but for such agreement, is of competent jurisdiction;

(Emphasis added). The PRO Act would also make it unlawful to, among other things, retaliate against an employee for not signing a class action waiver. Although the exact effect of this language will not be known until such point as it works its way through the courts, on its face, the PRO Act looks like a death-blow to class action waivers.

Bottom line: if the PRO Act becomes law, employers should expect unfair labor practice charges to be filed in response to the enforcement of class/collective action waivers.

GableGotwals is experienced in helping employers comply with labor and employment laws, auditing and updating arbitration agreements, policies, and procedures, training managers and supervisors, and providing real-time guidance to decision-makers to help minimize risk of costly claims. Our team of attorneys also defend employers in labor and employment disputes before all federal and state courts and agencies, and in arbitration proceedings. We are available to help you navigate state and federal employment laws and regulations. Please contact any GableGotwals Labor & Employment attorney for assistance.

Chris S. Thrutchley 918-595-4810 cthrutchley@gablelaw.com	Ashlyn M. Smith 405-568-3319 asmith@gablelaw.com

This article is provided for educational and informational purposes only and does not contain legal advice or create an attorney-client relationship. The information provided should not be taken as an indication of future legal results; any information provided should not be acted upon without consulting legal counsel.

January 7, 2021 | By: Scott Kiplinger and Chris Thrutchley

On January 6, 2021, the Department of Labor (“DOL”) issued a final rule distinguishing employees from independent contractors pursuant to the Fair Labor Standards Act (“FLSA”). The effective date of the final rule is March 8, 2021.

Whether particular workers are properly classified as employees or independent contractors is a common challenge for employers and poses a host of costly legal risks. Employers who misclassify employees as independent contractors run the risk of violating the FLSA and are vulnerable to a wide range of penalties for noncompliance, including trebled damages and an award of attorney fees. Liability under the FLSA is just one of the many risks of misclassification that employers face.

The DOL’s new rule is intended to resolve years of confusion among federal courts in determining which rule or factors to apply in distinguishing between employees and independent contractors. For more than 70 years, courts have relied on various forms of either a five or six-factor test. In some instances, multiple factors were combined into one analysis, while other factors were effectively ignored.

The new rule endorses the “Economic Reality” test, which provides five factors to determine whether an individual is an independent contractor in business for themselves or is an employee dependent on an employer for work. The first two factors under the Economic Reality test are the “core factors.” As such, they are deemed the most important in determining whether an individual is an employee or independent contractor. The core factors are:

• The nature and degree of control over the work.
• The worker’s opportunity for profit or loss based on initiative or investment.

The final three factors serve as “additional guideposts,” particularly when the core factors do not lead to the same result. These factors are:

• The amount of skill required for the work.
• The degree of permanence of the working relationship between the worker and employer.
• Whether the work is part of an integrated unit of production.

The DOL also issued six examples to illustrate how each factor could apply to a particular job or industry, but declined to predict the outcome for each scenario. Employers should review these examples in making classification decisions.

In a rapidly evolving economic and employment climate, employers should consult an attorney to ensure that classification decisions are as defensible as possible in light of the DOL’s most recent guidance. Seeking counsel can be a key to avoiding a “willful” violation the FLSA, which subjects an employer to significant additional liability.

GableGotwals’ employment and labor law group is committed to helping employers navigate the nuances of emerging issues they face and defending them when accused of noncompliance. Please contact any member of the team for further assistance.

Scott Kiplinger 405-568-3317 skiplinger@gablelaw.com	Chris Thrutchley 918-595-4810 cthrutchley@gablelaw.com

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This article is provided for educational and informational purposes only and does not contain legal advice or create an attorney-client relationship. The information provided should not be taken as an indication of future legal results; any information provided should not be acted upon without consulting legal counsel.