New Jersey Supreme Court Explores Goof Faith Defense For Employer’s Failure to Pay Overtime Under New Jersey Wage and Hour Law

The New Jersey Wage and Hour Law regulates minimum wage and overtime requirements.  It is New Jersey’s counterpart to the Federal Fair Labor Standards Act.  The Wage and Hour Law and Fair Labor Standards Act are bedrock elements of New Jersey employment law.  Under the Wage and Hour Law, New Jersey employers must pay overtime at a rate of one and half times an employee’s regular pay if she works more than forty hours a week.  However, if the employer is in the trucking industry, the employer is only legally required to pay overtime at the rate of one and half times minimum wage.  However, if the employer should have paid the higher rate but paid the lower rate, it can raise the defense that it did so in “good faith” reliance on government orders or regulations.

In the case of Branch v. Cream-O-Land Dairy, Elmer Branch filed a class action lawsuit in the New Jersey Superior Court against his employer, Cream-O-Land Dairy, on behalf of himself and similarly situated truck drivers employees, for non-payment of overtime in violation of the Wage and Hour Law.  Cream-O-Land argued that it was not required to pay the higher rate for two reasons.  First, it argued that it was a “trucking industry employer,” and that all the employees were paid at least the lower overtime rate.  Second, it argued that it met the “good faith” defense.  The trial agreed that Cream-O-Land satisfied the good faith defense and dismissed the case on that ground.  Branch appealed to the Appellate Division of the Superior Court which reversed, finding that the matters on which Cream-O-Land relied did not satisfy the statutory requirements of the Wage and Hour Law.

Cream-O-Land then appealed to the Supreme Court of New Jersey.  Because the trial judge did not address the exemption for trucking industry employers the Supreme Court, like the Appellate Division,  examined only whether Cream-O-Land satisfied the good faith defense.  It ruled that it did not.

The good faith defense is found in section 34:11-56a25.2 of the Wage and Hour Law.  It provides:

…[N]o 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. Such a defense, if established, shall be a complete bar to the action or proceeding, notwithstanding, that after such act or omission, such administrative regulation, order, ruling, approval, interpretation, practice, or enforcement policy is modified or rescinded or is determined by judicial authority to be invalid or of no legal effect.

Thus, the burden is on the employer to prove that it is entitled to the exemption.  Cream-O-Land argued that three separate cases it had been involved in satisfied the defense.  The first was a handwritten decision in  2007 by a hearing officer for the Department of Labor that he considered Cream-O-Land to be a trucking industry employer.  The employee did not appeal, so no decision by the Commissioner of the New Jersey Department of Labor or the Director of the New Jersey Wage and Hour Bureau themselves was ever issued.

In the second, an investigator sent an email to Cream-O-Land’s attorney that he considered it to be a trucking industry employer.  Again, since the employee who filed the complaint did not appeal, no decision by the Commissioner of the Department of Labor and Industry or the Director of the Wage and Hour Bureau themselves was ever issued.  In the final incident, the Department of Labor investigated another employee’s complaint in 2017.  A Section Chief of the Division of Wage and Hour Compliance again told the company that it was a trucking industry employer, but again the employer did not appeal so no further order was ever issued.

The Supreme Court explained that the statute itself requires that to satisfy the good faith defense the employer must rely on a “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” themselves.  The Supreme Court therefore explained that while Cream-O-Land’s reliance on the three decisions was understandable, it could not satisfy the statutory requirements.

The Supreme Court clearly understood that this decision might be unfair to the employer – after three cases in which it had prevailed because it was a trucking industry employer, at some point it should be able to rely on those findings that it was.  Indeed, while the Supreme Court felt constrained to rule against the company, it was clearly troubled by doing so.  Therefore in its opinion it urged the Legislature to amend the Wage and Hour Law to allow for reliance on these types of decisions, or for the Department of Labor to adopt appropriate regulations.  But until either one did so, the courts were required to follow the law as written.

The Supreme Court did not, however, rule that Cream-O-Land lost the case.  Rather it sent the case back to the Superior Court for the trial judge to consider whether the facts indicated that Cream-O-Land satisfied the requirements of the trucking industry employer exemption.

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