New Jersey Supreme Court Clarifies Good Faith Defense to Wage & Hour Claims

Seyfarth Synopsis: The New Jersey Supreme Court recently clarified the standard an employer must meet to successfully assert a good faith defense to wage and hour claims.

Background

The Supreme Court of the State of New Jersey recently issued an opinion interpreting important aspects of the New Jersey Wage and Hour Law (WHL).  This decision is especially important given the State’s landmark 2019 anti-wage theft law, which drastically increased the available remedies and statute of limitations for wage and hour claims.

In Elmer Branch v. Cream-O-Land Dairy, No. A-29-19 (Jan. 13, 2021), the employer asserted a good faith defense to various wage and hour claims asserted against it based on several favorable administrative decisions it previously received from the New Jersey Department of Labor and Workforce Development (“NJDLWD”) in connection with several audits.

The Court’s Ruling

In defense of its overtime pay practices, Cream-O-Land pointed to three prior decisions issued by employees of the NJDLWD, including:  a 2007 decision by a NJDLWD hearing and review officer; a 2014 decision by a NJDLWD senior investigator; a 2017 determination by a NJDLWD section chief; as well as a 2006 Opinion Letter by the Director of the Division of Wage and Hour Compliance.

New Jersey law provides an absolute defense to WHL claims for employers who prove that they have proceeded in good faith in conformity with and reliance on certain actions by the NJDLWD, specifically (1) “any written administrative regulation, order, ruling, approval or interpretation by the Commissioner . . . or the Director,” or (2) “any administrative practice or enforcement policy of such department or bureau with respect to the class of employers to which he belonged.”

The Court found none of the decisions the employer relied upon here met the strict requirements of the good-faith defense because each decision came from a subordinate employee and not from the Commissioner of the NJDLWD or the Director of the Wage and Hour Bureau. Id. at 28. It did not matter that all three decisions were determined in the employer’s favor before they could give rise to a final determination by the Commissioner. Id. at 28-29.

In so holding, the Court recognized the "Catch-22” employers face as a result of this ruling, and to that end, in addition to remanding the case for further proceedings as to the merits, remarked that:

The Court acknowledges, 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 that would satisfy that statute because each of those disputes was resolved without further review. The Court respectfully suggests that the Department would further the Legislature’s intent 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 Court also suggests that the Legislature and the Department determine whether additional statutory and/or regulatory guidance should be provided regarding the good-faith defense in WHL proceedings. In that regard, the Legislature may consider the approach to the good-faith defense in certain FLSA proceedings []. The Court also suggests that the Department consider adopting regulations clarifying the meaning of [certain] critical terms . . . .

 Employer Takeaways

While it remains to be seen if the Legislature acts on any of the Court’s recommendations to help establish clearer contours as to the good faith defense for WHL claims, New Jersey employers, especially those in the midst of a wage and hour lawsuit or audit, should proceed carefully when asserting a good faith defense.  Additionally, those employers currently in the midst of a NJDLWD audit may wish to adjust their strategy in the handling of such an audit as a “win” may no longer constitute the proverbial “silver bullet” needed to assert a good faith defense.