In Elmer Branch v. Cream-O-Land Dairy, (A-29-19/083379) (Decided January 13, 2021),the Supreme Court of New Jersey clarified the good faith defense under the New Jersey Wage and Hour Law (WHL), ruling that Cream-O-Land Dairy could not assert a defense under N.J.S.A. 34:11-56a25.2 based on its good-faith reliance on certain determinations by employees of the Department of Labor and Workforce Development (Department) that defendant is a “trucking industry employer.” The New Jersey Supreme Court also called on the Legislature and Department to make changes to further clarify the good-faith defense.
WHL Good Faith Defense
The WHL provides that an employer shall “pay each employee not less than 1 1⁄2 times such employee’s regular hourly rate for each hour of” overtime. The statute, however, creates an exemption from that overtime compensation requirement for employees of a “trucking industry employer. For such employees, the WHL provides for “an overtime rate not less than 1 1⁄2 times the minimum wage.”
Another provision of the WHL, N.J.S.A. 34:11-56a25.2, affords to an employer an absolute defense in certain WHL actions involving minimum wages and overtime compensation based on the employer’s good-faith reliance on certain Department determinations. To establish the good-faith defense, the employer must “plead and prove that the act or omission complained of was in good faith in conformity with and in reliance on” one of two alternative categories of determinations: (1) “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 (2) “any administrative practice or enforcement policy of such department or bureau with respect to the class of employers to which [the employer] belonged.”
Facts of Elmer Branch v. Cream-O-Land Dairy
Plaintiff Elmer Branch asserted claims against his employer, defendant Cream-O-Land Dairy, for payment of overtime wages pursuant to WHL. Plaintiff contended that he and similarly situated truck drivers employed by defendant were entitled to overtime compensation at 1 1⁄2 times their regular hourly wage under N.J.S.A. 34:11- 56a4(b)(1).
Cream-O-Land Dairy raised two defenses. First, it argued that it is a “trucking industry employer” and therefore exempt from the overtime requirements of N.J.S.A. 34:11-56a4(b)(1) and required to pay only 1 1⁄2 times the minimum wage for overtime hours. Second, defendant asserted that it relied in good faith on certain determinations that it qualified as a “trucking industry employer” and could therefore invoke the defense set forth in N.J.S.A. 34:11-56a25.2.
In support of its assertion of the WHL’s good-faith defense, Cream-O-Land Dairy cited three prior determinations by employees of the Department concluding that defendant was a “trucking industry employer” entitled to claim an exemption under N.J.S.A. 34:11-56a4(f). Those determinations were reached by a hearing and review officer, a senior investigator, and the Section Chief of the Division of Wage and Hour Compliance (Division), respectively, but not by the Commissioner of Labor or Director of the Division. None of those matters was appealed by the complainant driver, and no further proceedings occurred in the Department with respect to any of the three matters.
The trial court concluded that those decisions satisfied N.J.S.A. 34:11-56a25.2’s standard for the good-faith defense and granted summary judgment dismissing plaintiff’s claims. The court did not address whether defendant constituted a “trucking industry employer” within the meaning of N.J.S.A. 34:11-56a4(f).
The Appellate Division reversed, finding that none of the determinations on which defendant relied met the requirements of the good-faith defense under the plain language of N.J.S.A. 34:11-56a25.2. The Appellate Division also rejected defendant’s invocation of a 2006 Opinion Letter by the Director of the Division that for certain employees of trucking industry employers, N.J.S.A. 34:11-56a4 “establishes their overtime rate at 1 1⁄2 times the minimum wage” because defendant did not represent that it had relied on that letter when it determined its overtime compensation.
NJ Supreme Court’s Decision in Elmer Branch v. Cream-O-Land Dairy
The New Jersey Supreme Court affirmed, agreeing that none of the decisions identified by defendant satisfy the requirements of the good-faith defense under the plain language of N.J.S.A. 34:11-56a25.2.
In reaching its decision, the court emphasized that the Legislature identified only two bases for the assertion of a good-faith defense by an employer under the WHL. It further noted that although the Legislature has empowered the Commissioner, the Director, “and their authorized representatives” to investigate potential violations of the WHL, the Legislature limited the first prong of the good-faith defense to determinations issued by the Commissioner and the Director themselves. The New Jersey Supreme Court also noted that the WHL permits reliance on a Department practice or policy applying the WHL to a “class of employers” and their employees, not to adjudications of individual complaints against a given employer.
Despite its ruling that the good-faith defense did not apply, the court acknowledged that employers like Cream-O-Land Dairy face a Catch-22. “We acknowledge, however, the dilemma faced by an employer such as defendant, which repeatedly prevailed in overtime disputes before subordinate Department employees but was unable to seek a ruling from the Commissioner of the Department of Labor and Workforce Development (Commissioner) because each of those disputes was resolved without further review,” the court wrote.
The New Jersey Supreme Court went on to encourage the Legislature and Department to work to refine the good-faith defense, writing:
We respectfully suggest that the Department would further the Legislature’s intent in N.J.S.A. 34:11-56a25.2 if it instituted a procedure by which an employer in defendant’s position could obtain an opinion letter or other ruling clarifying its obligations under the WHL’s overtime provisions. The Legislature and the Department may determine whether further statutory or regulatory guidance should be provided regarding the good-faith defense under N.J.S.A. 34:11-56a25.2. In that regard, the federal approach to the good-faith defense set forth in the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. §§ 201 to 219, and the regulations promulgated pursuant to the FLSA, may be considered.
The New Jersey Supreme Court remanded the case back to the trial court for consideration of defendant’s argument that it is a trucking-industry employer within the meaning of N.J.S.A. 34:11- 56a4(f) and for determination of whether defendant complied with the applicable WHL overtime standards in compensating its employees.