The Sixth Circuit yesterday outlined narrow circumstances under which an employer can show good faith reliance on a Department of Labor opinion letter in setting wage-hour policy.  In Perry v. Randstad General Partner, No. 16-1010 (6th Cir. Nov. 20, 2017), the Court held the employer did not establish a good faith reliance defense despite undisputed evidence that the employer relied on a 2005 DOL opinion letter in determining that its employees met the administrative exemption of the FLSA. The opinion serves as a note of caution to employers relying on DOL opinion letters for wage-hour policies.

The employees at issue in Perry performed various recruiting, staffing management, and sales functions for their temporary staffing agency employer. In classifying those employees as exempt, the employer relied on a 2005 DOL opinion letter finding that staffing managers qualified as exempt under the administrative exemption.  The employer thus argued it acted in good faith and thus was not liable under the Portal-to-Portal Act’s protection for employers who take “certain actions on the basis of an interpretation of the law by a government agency, even if the agency’s interpretation later turned out to be wrong.” That defense requires two prongs: (1) the employer acted in conformity with the agency’s opinion, and (2) the employer relied in good faith.

In Perry, the court found the employer’s reliance “was not ‘in conformity with’” the DOL’s letter.  The court found that the DOL cited certain facts in its analysis that were not present in this employer’s case.   The court noted only two differences between the exempt staffing managers in the opinion letter and the employees at issue: (1) the employees at issue did not have ultimate hiring or firing authority, and (2) the employees at issue did not work with “very little supervision.”  (Those differences seem slight in the context of the multi-factored exemption analysis, demonstrating how narrowly the court construed this prong of the good faith defense.)

The court also found that the employer did not act in good faith because the employer knew that its employees’ job duties varied significantly based on factors such as the clients, market, and supervisor.  Despite that knowledge, the employer classified all of its employees as exempt nationwide and conducted no individualized analysis.

Key Takeaways: The case presents two important lessons.  First, employers must construe DOL opinion letters narrowly when relying on them.  Second, employers must conduct individualized analyses before applying exemptions and as part of routine wage-hour audits as discussed here.  For employers with nationwide operations, that means conducting a state- or region-wide analysis at a minimum and training in-the-field managers to spot wage-hour issues.