New Jersey Supreme Court hears trucking wage lawsuit case

October 16, 2020

Tyson Fisher

|

The New Jersey Supreme Court recently heard oral arguments in a trucking class action wage lawsuit, with the “good faith defense” at the center of the controversy in the case.

On Sept. 30, New Jersey’s high court listened to arguments from attorneys representing Cream-O-Land, a class of its truckers and several interested parties sitting in as amicus. Essentially, the court is being asked to interpret the state’s Department of Labor’s good faith defense statute, which exempts a company from a wage lawsuit if it can prove it was all a misunderstanding.

The following statue is front and center of the New Jersey Supreme Court case:

No employer shall be subject to any liability or punishment for or on account of the failure of the employer to pay minimum wages or overtime compensation under this act, if he pleads and proves that the act or omission complained of was in good faith in conformity with and in reliance on 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 any administrative practice or enforcement policy of such department or bureau with respect to the class of employers to which he belonged.

Facts of the case

In November 2016, truckers for Cream-O-Land Dairy filed a class action lawsuit alleging they were not properly paid overtime wages.

One determination was issued by a Department of Labor wage and hour compliance officer in July 2007. The employee who initiated the complaint claimed he was not paid overtime wages. The company was eventually fined $40,000 for failure to pay overtime wages.

After an appeal, the officer overturned the fine. He concluded that Cream-O-Land is considered a trucking industry employer rather than a dairy industry employer. Consequently, the company was only required to pay drivers 1.5 times the state minimum wage for overtime wages. The drivers already were receiving that pay based on their base wages. Cream-O-Land was therefore considered compliant with that requirement.

A similar decision was made in June 2014 in a separate overtime wage complaint by an individual employee. The Department of Labor concluded that Cream-O-Land falls under the federal trucking guidelines regarding overtime exemption. A similar decision was handed down in April 2017.

During court proceedings, the former director of the Division of Wage and Hour Compliance certified that the company has in good faith relied on the results of the three investigations.

The trial court reasoned that the three investigations and determinations were enough to establish an enforcement policy with respect to the company’s industry, thereby entitling it to the good faith defense. Cream-O-Land was awarded summary judgment.

According to the appellate court, since the three decisions were “discrete communications by a subordinate member of the department regarding investigations based on information received from the employer,” they were “clearly not intended to apply uniformly or automatically to a particular industry.”

A 2006 opinion letter by the former director of the Division of Wage and Hour Compliance was obtained by Cream-O-Land regarding acceptable methods of compensation for day rate employees.

The attorney general noted that the letter supports the department’s interpretation a decade ago. However, the attorney general refused to take a position on the letter present day. The attorney general also declined to determine whether or not Cream-O-Land can demonstrate it is in compliance.

“Although we are not bound by the attorney general’s interpretation of the (wage and hour law), it is nonetheless entitled to a degree of deference, in recognition of the attorney general’s special role as the sole legal adviser to most agencies of state government, including the DOL,” the court said.

The appellate panel also agreed that only the commissioner’s final decision can be cited to invoke the good faith defense.

Was the good faith defense adequately proven?

Representing Cream-O-Land, David Kott argued that the three decisions made from 2007 to 2017 are more than enough to support the good faith defense.

“Three different employees on three different occasions over a 10-year period made a complaint that they were not being paid proper overtime,” Kott said. “All three complaints were fully investigated, and there were three decisions. All three decisions were made by employees of the department who were fully authorized by the commissioner to make the decisions.”

At the heart of the case is whether or not the statue requires only the commissioner or director to make that determination. The statue states a determination needs to be made “by the commissioner of the Department of Labor and Industry or the director of the Wage and Hour Bureau, or any administrative practice or enforcement policy of such department or bureau with respect to the class of employers to which he belonged.”

Kott argued that in no way did the legislature intend for only the commissioner or director to single-handedly deal with good faith defense claims.

It is understood, he argued, that commissioners and directors act through their authorized agents.

Representing the New Jersey Civil Justice Institute and the National Federation of Independent Business, Jeffery Jacobson argued that allowing only the commissioner or director to sign off on good faith defense claims would make it nearly impossible for employers to seek that protection.

“I think we can all agree that the legislature was trying to create a good faith defense,” Jacobson said. “They may not have been making it easy for an employer to rely on the good faith defense but they were not trying to make it impossible. The attorney general’s position here is contrary to the plain text of the law, and it simply can’t be right that an employer needs to wait for final agency decision, because that takes concept of good faith entirely out of the statute.”

An attorney for the New Jersey Business and Industry Association echoed that sentiment.

Stripping rights away from workers?

Ravi Sattiraju, representing the class of truckers, argued that the documents granting the good faith defense were conducted by unqualified employees, as evidenced by the informal nature of the documents.

“The appellants in this case want to strip away the statutory rights of a class of workers based on a handwritten note and a couple sentences by midlevel employees,” Sattiraju said.

Regarding who is qualified to make determinations, Sattiraju said that other sections of the law clearly use words like “designees.” However, those words are nowhere to be found in the good faith defense statute. Whether or not that raises the bar too high for employers is a question for the legislature, not the courts.

Sattiraju argued that granting Cream-O-Land summary judgment will discourage workers from seeking action from the Department of Labor. If a similar decision binds all coworkers to an unfavorable outcome, a potential whistleblower would not want to be the one who caused that to happen.

“This is very dangerous what the defendants are asking us to do, because oftentimes people who files complaints with the Department of Labor don’t go in with attorneys,” Sattiraju said. “They’re not aware what their statutory rights are. They’re not aware what to pursue in discovery. It’s an un-level playing field in many ways.”

Deputy Attorney General Caroline Jones argued that the legislature intended to keep the bar high for the good faith defense because of the high collateral consequences.

Questions about the statute aside, Sattiraju argued that granting summary judgment occurred before discovery could begin. He claimed that a lot of information may be found that invalidates Cream-O-Lands claim of being a trucking company, among other factors detrimental to the case.

State clarifies the good faith defense statute

On April 13, the state legislature responded directly to this case by amending the statue in question.

Bill A3926 expands the wage and hour good faith defense to state Department of Labor and Workforce Development employee interpretation. Since the bill was signed after the case, it does not apply to Cream-O-Land’s situation. However, it is designed to avoid in future disputes regarding who is qualified to make such determinations.

The updated statute adds “authorized representative” to the list of who can grant a good faith defense. An authorized representative is defined as “an employee of the Department of Labor and Workforce Development or the Division of Wage and Hour Compliance, as appropriate, operating within the scope of his or her normal responsibilities.”

“This bill is in response to the issues raised by Branch v. Cream-O-Land Dairy, concerning a violation of the law that was upheld as a violation because the corrective ruling which the violator sought regarding compliance was made by an employee of the Department of Labor and Workforce Development, and not the commissioner,” a statement in the bill reads. LL

Tyson Fisher

Tyson Fisher joined Land Line Magazine in March 2014. An award-winning journalist and tireless researcher, his news reports, features and blogs bring depth to our editorial content, backed with solid detail. Tyson is a lifelong Kansas Citian.