The Wave of Summer Litigation We All Saw Coming

By [ Evan Armstrong ]
05/28/2024

Over the past few months, many of President Biden’s administrative priorities are being finalized ahead of his reelection bid in November. Throughout 2022 and 2023 agencies such as the Department of Labor (DOL), the National Labor Relations Board (NLRB), and the Federal Trade Commission (FTC) all sought new, sweeping regulations affecting America’s workforce. RILA offered thoughtful and extensive comments to address some of the critical concerns for retailers in the various proposed rules, specifically; we noted that the overreach by the agencies would likely result in litigation and undercut the central purpose of the proposals. We are seeing the legal proceedings against the rules unfold today and it is important to note this did not need to be the case. The administration’s regulatory actions could have taken alternative paths and potentially safeguarded the rules from probable defeat in the courts, but they did not.

Here is where the completed and published rules are as of right now and they are nowhere near final:

The DOL proposed broadening the definition of employee under the Fair Labor Standards Act (FLSA). The final rule creates a test to determine worker classification that is strongly weighed against an individual worker being classified as an independent contractor. The RILA led Coalition for Workforce Innovation offered constructive comments arguing the DOL’s perspective was overly broad and would sweep millions of people and businesses into a status they do not want. Currently, CWI is leading litigation against the DOL’s rule arguing it is arbitrary and capricious and is misaligned with previous court precedents and the modern economy. A decision at the federal district court level is expected in July 2024.
The DOL proposed an increase to the salary threshold to determine exempt versus non-exempt employees under the FLSA. RILA responded in formal comments that periodic increases were appropriate as long as they did not increase too quickly and undermine retail operations. Unfortunately, the DOL finalized a rulemaking that ultimately raises the threshold from $35,000 to nearly $59,000 by January 1, 2025. It also includes an auto-escalator clause that would raise the threshold again in 2027 to potentially over $70,000. A lawsuit has been filed in the same court that struck down the Obama Administration’s rule in 2016 which will likely result in the final rule being struck down in part or in full. A decision could be made by July 1, 2024
In 2023, the NLRB finalized its “joint employer” rule that broadened the ability for the Board to connect independent employers as it relates to the National Labor Relations Act. RILA submitted comments arguing this policy would disrupt retail supply chains that rely on close connectivity between many components including the retailer, suppliers, and logistics companies. In addition, the Board ignored previous court decisions that had struck down a similar Obama era effort. In March, 2024 a federal district court vacated the rule. The DOJ has appealed, and further action is expected this summer.
In 2023 the FTC sought to ban all non-competes throughout the economy. The authority to make this sweeping regulatory action notwithstanding, a total ban on non-competes misunderstands how most employers utilize these agreements. For this reason, RILA offered comments, including data from retailers, that strongly argued non-competes were a useful, and appropriate tool to protect investments in employees, and safeguard potentially sensitive intellectual property or business information. RILA members are sensitive to which employees sign these agreements. For example, retailers do not ask front-line associates to sign these agreements. Unfortunately, the FTC ignored these comments and finalized a complete ban. The U.S Chamber and the Business Roundtable filed suit and a decision on their request for a preliminary injunction could be decided in early July.

It is frustrating that the Administration has sought aggressive regulatory actions with dubious legal underpinnings. However, the Administration continually ignores these legal warnings about the overreaching scope of their agenda. We will see how the courts respond throughout a long, hot summer ahead of the elections in November. Rest assured RILA and its member companies will remain leaders in creating a 21st Century Retail Workforce that is diverse, innovative, and skilled. Sadly, these foreseeable and preventable missteps by the Administration undermine leading retailers’ ability to focus on that mission.