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Employers: Consider Challenging Agency Actions

If you are like most employers, you have noticed government regulation becoming increasingly burdensome over recent years. As political deadlocks have prevented Congress and many state legislatures from passing new laws, government agencies have taken it upon themselves to issue new rules and change their interpretation of existing rules to suit their agendas. This has placed even greater burdens on employers by forcing them to dedicate more resources to compliance, and by occasionally imposing unforeseen costs and penalties. Fortunately, employers who find themselves in these situations may have options for avoiding these burdens. As several recent cases show, government agencies do not always interpret the law correctly and, when they are wrong, their decisions can be challenged.

One recent decision illustrates how this can occur. In this case, a group of mortgage bankers challenged the U.S. Department of Labor, after it changed the way it interpreted overtime laws and took the new position that employers must pay mortgage loan officers overtime. The mortgage bankers requested a court to overturn the DOL’s decision, claiming that the DOL failed to follow the proper procedures before it modified its prior interpretation of the law. The court agreed, and thus struck down the DOL’s interpretation. In doing so, it reasoned that the DOL had effectively amended its formal interpretation of the law and, therefore, it needed to notify the public in advance and give interested parties an opportunity to comment. In sum, because the DOL failed to take the proper steps, the mortgage bankers avoided the burden of having to pay their mortgage loan officers overtime.

Our firm recently helped a client achieve a similar result. The case involved a general contractor and two subcontractors who had been paying their delivery drivers wages at generous union-comparable rates. This had been their practice for years without challenge from any government agency. Nevertheless, about three years ago, the DOL informed the contractors that it believed federal law required them to pay their drivers even more generous “prevailing wages.” To make things worse, the DOL also brought suit on behalf of more than 50 drivers, claiming that the contractors owed them back pay for the times that they had received only union-comparable wages, but not prevailing wages.

It was clear that the DOL’s position had questionable legal support, and the client wisely chose to challenge the agency’s action. We eventually filed a motion to the administrative law judge and argued that the prevailing wage law did not cover delivery drivers, based on the text of the law and the way courts had interpreted it. The judge agreed and dismissed the DOL’s claims. He also issued a strongly worded opinion supporting the contractors’ position that they were paying their employees appropriately.

These decisions show that government agencies’ legal positions are not always correct and will not necessarily survive scrutiny in court. This appears to be the case more often recently, as many government agencies have taken aggressive enforcement positions and, thus, often left themselves more vulnerable to challenge. If your business is having trouble complying with a new regulation or burdened by a new government enforcement position, you should remember that you may have options other than compliance. It may be prudent to discuss the matter further with counsel because, if the government lacks legal support, it may be vulnerable to challenge.

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