On Wednesday, January 13, 2021, the New Jersey Supreme Court issued its decision in Branch v. Cream-O-Land Dairy, in which NJCJI appeared as amicus curiae. The decision presents a cautionary tale for employers who rely on comments or decisions by officials from the New Jersey Department of Labor and Workforce Development (NJDOL) regarding the appropriateness of the employer’s compensation practices under the State’s wage-and-hour law.
By way of background, under New Jersey law, no employer can be held liable for failure to pay the minimum wage or overtime compensation if, in good faith, it conformed with and relied on a regulation, order, ruling, approval or interpretation by the Commissioner of NJDOL or the Director of its Wage and Hour Bureau, or an administrative practice or enforcement policy of NJDOL. Although this statutory “good-faith” defense to wage-and-hour claims has existed for decades, there is scant case law explaining the types of communications from NJDOL that employers can rely on or how they can establish good faith.
Cream-O-Land Dairy received three separate communications from NJDOL officials over the course of ten (10) years, each after a field investigation, informing the company that it paid its employees appropriately. None of those communications, however, came from the NJDOL Commissioner or the Director of its Wage and Hour Bureau. Cream-O-Land was later sued by a putative class of employees for alleged unpaid compensation. In response, Cream-O-Land argued that its compensation practices were appropriate for the reasons previously communicated by NJDOL. Further, Cream-O-Land argued that the above-described statutory defense applied based on its good-faith reliance on NJDOL’s communications. The trial court agreed with Cream-O-Land and dismissed the class action on the basis of the good-faith defense, but the Appellate Division later reversed.
In support of the employer’s legal position in the case, NJCJI argued that the text and intent of the good-faith defense should allow employers to rely on guidance communicated by lower-level NJDOL officials when they act as the final decision-maker in an investigation. Unfortunately, the Supreme Court disagreed, relying on a narrow reading of the applicable statute to further the remedial purpose of the New Jersey wage-and-hour law. Accordingly, written communications from the Commissioner of NJDOL or the Director of its Wage and Hour Division, stating that an employer’s compensation practices are appropriate, remain the only clear safe harbor from litigation.
However, NJCJI is still pleased that the Supreme Court explicitly acknowledged the difficult situation that New Jersey employers face here. That is, the Supreme Court noted that NJDOL presently offers no formal procedure for employers to seek advisory opinions signed by the Commissioner or Director. Without a mechanism for employers to solicit such opinions, businesses risk litigation even when other NJDOL officials repeatedly assure them that their compensation practices are appropriate. The Supreme Court therefore suggested that NJDOL develop a procedure for employers to obtain these advisory opinions. The Supreme Court further suggested that the Legislature and NJDOL determine whether additional statutory or regulatory guidance should be provided to employers and employees regarding the applicability of the good-faith defense in wage-and-hour proceedings.
With the recent enactment of New Jersey’s “wage theft” law, employers of all sizes now face astronomical liability for violations of the State’s wage and hour laws. Employers should not be forced to endure costly “bet-the-company” litigation to get answers on these complex and often unsettled legal issues; especially in today’s unprecedented operating environment due to COVID-19. Accordingly, NJCJI hopes that NJDOL will follow the Court’s suggestion and establish a procedure for obtaining reliable advisory opinions on these issues so that a clear safe harbor will be available to employers. Further, NJCJI hopes that NJDOL or the Legislature will provide further clarity regarding the applicability of the good-faith defense.
NJCJI would like to thank Jeffrey Jacobson of Faegre Drinker for his excellent advocacy and representation of NJCJI in this matter.
A copy of the Court’s decision can be found HERE