The Supreme Court Follows Plain Statutory Language and Limits the “Good Faith Defense” Under the Wage and Hour Law

Branch v. Cream-O-Land Dairy, ___ N.J. ___ (2021). As summarized here, the Appellate Division in this overtime Wage and Hour Law (“WHL”) class action case reversed a summary judgment ruling for the defense, holding that the statute’s “good faith defense” was not available to defendant. Today, in a unanimous opinion by Justice Patterson, the Supreme Court affirmed that decision.

The Court’s decision was based on the plain language of the statute. As Justice Patterson summarized, to invoke the good faith defense, an 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 [“the Department”] 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.’ N.J.S.A. 34:11-56a25.2.”

On three prior occasions, employees of the Department had determined that defendant was a “trucking industry employer” and therefore entitled to an exemption from the Wage and Hour Law afforded by N.J.S.A. 34:11-56a4(f). Based on those rulings, defendant argued the good faith defense on summary judgment in the Law Division.

The Law Division granted summary judgment, but the Appellate Division reversed. The Supreme Court agreed with the Appellate Division. As relevant here, the statutory language created a good faith defense only for rulings of the Commissioner of the Department. The three prior rulings were not by the Commissioner. Though defendant “prevailed in overtime disputes before subordinate Department employees[, defendant] 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.”

Though the Court agreed with the Appellate Division about the good faith defense, the Justices stated that the statute’s plain language “leaves an employer such as defendant in a difficult position.” That was because there was “no procedural route to secure a ruling by the Commissioner or Director with respect to” the determinations of the lower level Department employees that defendant was a “trucking industry employer.”

In a somewhat unusual move, but one that the Justices said was “[c]onsistent with the Legislature’s intent when it enacted the WHL’s good-faith defense,” the Court “respectfully suggest[ed] that the Department develop a procedure whereby an employer can seek an opinion letter or other ruling from the Commissioner or Director regarding a claimed exemption from the WHL’s overtime requirements. Such a procedure would assist employers who intend in good faith to comply with their obligations under the WHL, clarify the employer’s obligations under the WHL, and avoid unnecessary litigation.”

The Court also “suggest[ed] that the Legislature and the Department determine whether additional statutory and/or regulatory guidance should be provided to employers and employees regarding the good-faith defense in WHL proceedings. In that regard, the Legislature may consider the approach to the good-faith defense in certain [Fair Labor Standards Act] proceedings adopted by Congress in 29 U.S.C. §§ 259 and 260. We also suggest that the Department consider adopting regulations clarifying the meaning of N.J.S.A. 34:11-56a25.2’s critical terms, as the United States Department of Labor defined the core terms of 29 U.S.C. § 259 in 29 C.F.R. §§ 790.13 to 790.19.”

For today’s case, however, defendant lost the good faith defense argument. But all was not lost for defendant in the larger battle. The Court remanded the matter “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.”