Alert > Employment and Labor

April 28, 2010

On March 24, 2010, the U.S. Department of Labor (DOL) announced it would cease its longstanding practice of issuing Opinion Letters. This change comes at a time when the DOL has also announced that it is significantly increasing its enforcement efforts. In particular, the budget for fiscal year 2011, which begins in October, seeks increased funding and staffing for the Wage and Hour Division, which has already grown from 731 investigators in 2009 to 894 investigators by the first quarter of 2010. This change in focus likely will be visible to employers.

No More Opinion Letters

For years, Opinion Letters written in response to inquiries from specific employers about specific facts served as a useful tool for employers looking for guidance from the DOL on tricky, fact-specific wage and hour issues in the workplace. The Opinion Letters, published on the DOL website for the Wage and Hour Division, enabled all employers to review the DOL’s position and apply the advice to its own workforce.

In place of Opinion Letters, the DOL will issue “Administrator Interpretations.”  “Administrator Interpretations” will be released when, in the Administrator’s discretion, “further clarity regarding the proper interpretation of a statutory or regulatory issue is appropriate.” The Interpretations, unlike Opinion Letters, will be general interpretations of law and regulations rather than the specific application of law to a particular set of facts. The DOL anticipates continuing to receive requests for Opinion Letters but intends to respond only with references to relevant statutes, regulations and cases without applying them to the facts presented. It will also analyze the types of requests received for determining which areas interpretative guidance may be useful. The DOL considers the change a better use of its resources and believes employers will find general guidance more useful than specific application of the law.

The DOL has already issued its first “Administrator Interpretation” in which it analyzed the typical job duties of mortgage loan officers and concluded that typical loan officers do not qualify for the administrative exemption. This Interpretation is a departure from a previous 2006 Opinion Letter, which is now withdrawn, reaching the opposite conclusion.

How much of an impact the loss of Opinion Letters will have on employers remains to be seen. With Opinion Letters, employers had the ability to influence the types of issues and factual situations the DOL addressed. “Administrator Interpretations,” on the contrary, will be issued on subjects selected by the DOL and will likely reflect the DOL’s enforcement initiatives at the time. It is also unknown how often “Administrator Interpretations” will be released, how specific they will be and whether they will go beyond a general recitation of the law. Critics view the change in practice from Opinion Letters to “Administrator Interpretations” as another example of the DOL’s focus on punishing employers rather than helping them prevent misapplication of tricky areas of the law.

Focus on Enforcement

Employers should be mindful that this new focus on enforcement is not without teeth. In addition to an increase in investigators employed to investigate and audit employers workplace practices, the Wage and Hour Division budget now also includes a new multi-agency “Misclassification Initiative” focused solely on enforcing labor violations that result from misclassifying employees as independent contractors. The budget allots $12 million and 90 FTE to support trainings and 4,700 investigations, directed primarily at the construction, child care, home health care, grocery stores, janitorial, business services, poultry and meat processing, and landscaping industries.

What This Means for Employers

In the face of increased efforts by the DOL to find wage and hour violations, employers will no longer have the benefit of relying on fact-specific guidance from the DOL. Misclassification of employees will be a primary focus of the DOL’s enforcement efforts. Employers who get it wrong could face significant penalties and liability for back wages, overtime and benefits, along with severe tax consequences. Now is a good time for employers to carefully analyze the classification of its workforce, as well as compliance with other key wage and hour laws.  

This alert was authored by Bingham labor and employment partner Walter Stella and associate Jacqueline Bronson. For more information on this alert or any other labor and employment issues, please contact any of the lawyers listed below:

Boston
John Adkins, john.adkins@bingham.com, 617.951.8551
Jenny Cooper, jenny.cooper@bingham.com, 617.951.8473
Louis Rodriques, Co-chair, Labor and Employment Group, louis.rodriques@bingham.com, 617.951.8340

Los Angeles/Orange County
Jacqueline Aguilera,jacqueline.aguilera@bingham.com, 213.229.8439
Debra Fischer, debra.fischer@bingham.com, 213.680.6418

San Francisco
Alan Berkowitz, alan.berkowitz@bingham.com, 415.393.2636
James Severson, james.severson@bingham.com, 415.393.2242
Walter Stella, walter.stella@bingham.com, 415.393.2750

Santa Monica
Arthur Silbergeld, arthur.silbergeld@bingham.com, 310.255.9077

Silicon Valley
Wendy Lazerson, Co-chair, Labor and Employment Group, wendy.lazerson@bingham.com, 650.849.4840

New York
Douglas Schwarz, douglas.schwarz@bingham.com, 212.705.7437

Tokyo
Mie Fujimoto, mie.fujimoto@bingham.com, 81.3.6721.3138