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Call Us. Submit Your Case, Court Notes Employer 'Dilemma,' But Cream-O-Land Wage Suit Trucks Ahead

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By Suzette Parmley | January 14, 2021 at 12:07 PM

In a case some foresee will impact future wage disputes, the New Jersey Supreme Court ruled unanimously that an employer that failed to meet standards of the safe harbor defense and exemption as a "trucking industry employer" under the New Jersey Wage and Hour Law must pay appropriate overtime wages to its workers.

But in a nod to the employer's dilemma and the statute's complexity, the justices also suggested that better guidelines were needed from the state Labor & Workforce Department in handling such matters.
In Elmer Branch v. Cream-o-Land Dairy, the justices on Wednesday ruled 7-0 to affirm an appellate court's decision that reinstated plaintiff Elmer Branch's putative class action suit on behalf of himself and other truck drivers in a similar situation against their employer, Cream-O-Land Dairy Inc., a food service distributor based in Florence, over owed overtime wages.

Under the Wage and Hour Law (WHL) exemption, a "trucking industry employer" is mandated to pay "an overtime rate not less than 1 ½ times the minimum wage," as opposed to "paying each employee not less than 1 ½ times such employee's regular hourly rate for each hour of" overtime--which was the core issue in this appeal. Cream-O-Land sought the exemption so it could pay the lesser amount.

Branch alleged he and the other drivers worked an average 60 to 80 hours per week--far above the standard 40-hour work week--loading, unloading and delivering the company's snack products to customers.

"We concur with the Appellate Division that none of the decisions identified by defendant satisfy the requirements of the good-faith defense under the plain language of N.J.S.A. 34:11-56a25.2," wrote Justice Anne Patterson for the court. "The Court remands this 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."

But the court also suggested that a procedure should be established for employers on obtaining advisory opinions on such matters from a director or commissioner of the labor department, and that additional statutory and/or regulatory guidance was needed from the Legislature over the WHL's good faith defense.

The WHL was enacted in 1996.

New Jersey Supreme Court Justice Anne Patterson/photo by Carmen Natale/ALM
"We acknowledge ... the dilemma faced by an employer such as defendant, which repeatedly prevailed in overtime disputes before subordinate Department employees but 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," said the 34-page opinion. "We respectfully suggest that the Department would further the Legislature's intent in N.J.S.A. 34:11-56a25.2 if it instituted a procedure by which an employer in defendant's position could obtain an opinion letter or other ruling clarifying its obligations under the WHL's overtime provisions."

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Chief Justice Stuart Rabner, and Justices Jaynee LaVecchia, Barry Albin, Faustino Fernandez-Vina, Lee Solomon and Fabiana Pierre-Louis, joined Patterson in the Wednesday opinion.

Ravi Sattiraju of Sattiraju & Tharney in East Windsor, who represented Branch, said his client was pleased with the court's ruling.

"We agree with the Court's analysis that the defendant did not meet the requirements for the safe harbor provision under the Wage and Hour Law, and we look forward to litigating the case," said Sattiraju in a phone call on Wednesday.

David R. Kott of the Newark office of McCarter & English represented defendant Cream-O-Land. Kott did not immediately respond to requests for comment.

The New Jersey Civil Justice Institute, which was among a half-dozen amici in the case, argued that the text and the intent of the law should allow employers to rely on guidance communicated by lower-level labor department officials when they act as a final decisionmaker on a complaint--which the Justices ultimately disagreed with.

NJCJI President Anthony Anastasio issued this statement on Wednesday: "NJCJI is pleased that the New Jersey Supreme Court acknowledged a serious problem that New Jersey employers face under the State's complex wage and hour laws. Current law only provides a clear safe harbor from litigation if the Commissioner of the Department of Labor and Workforce Development (LWD), or the Director of its Wage and Hour Division, personally communicates with the employer in writing, stating that the employer's practices are appropriate.

"However, at the end of its decision in the case, the Supreme Court noted that LWD presently offers no formal procedure for employers to seek advisory opinions signed by the Commissioner or Director," added Anastasio. "Without a mechanism for employers to solicit such opinions, businesses risk litigation even when other LWD officials repeatedly assure them that their wage-and-hour practices are appropriate. The Supreme Court highlighted the difficulty of this situation and suggested that LWD develop a procedure for employers to obtain advisory opinions."

Anastasio said Wednesday's ruling was timely.

"With the recent enactment of New Jersey's 'wage theft' law, employers of all sizes now face astronomical liability for violations of the State's wage and hour laws," said Anastasio. "Accordingly, NJCJI hopes that LWD will follow the Court's suggestion and establish a procedure for obtaining advisory opinions on these complex legal issues so that a clear safe harbor defense will be available to employers."

Michael A. Galpern, of Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins in the firm's Voorhees office, argued on behalf of amicus New Jersey Association for Justice. The NJAJ, representing 2,300 plaintiffs lawyers across the state, supported Branch's position and urged the Supreme Court to interpret the exception to the WHL narrowly.

"The Appellate Division made the right ruling," Galpern said. "This [the WHL] is a remedial statute that seeks to remedy a problem. There is a problem in New Jersey and in the United States with people not getting a fair day's wage for a fair day's work. This [case] was an exception on why you didn't have to pay people pursuant to the New Jersey Wage and Hour Law, and exceptions to remedial statutes have to be read narrowly.

"The court said the defendant was wrong to rely on previous low-level rulings for a good faith defense," said Galpern. "The court set out clear, specific, understandable and reasonable directions for the lower court, the parties and future parties on how to proceed with this case, but also sent a clear invitation to the Department of Labor, if they're so inclined, on how they can clarify who and what triggers the good faith exemption. It was a very good ruling today."

The court granted certification in 2019, and the case was argued before the justices on Sept. 30, 2020. In addition to NJCJI and NJAJ, the New Jersey Business & Industry Association (NJBIA), Commerce and Industry Association of New Jersey, the National Federation of Independent Business, and the State of New Jersey appeared as amici.

The justices reviewed whether Cream-O-Land could assert a defense under N.J.S.A. 34:11-56a25.2 based on its good-faith reliance on three previous determinations by lower level employees of the labor department that it is a "trucking industry employer."

Those three previous determinations spanned a decade, starting in 2007, and were reached by a hearing and review officer, a senior investigator, and the section chief of the Division of Wage and Hour Compliance, respectively, but not by the commissioner of labor or director of the division, according to court documents.

A trial court viewed the previous decisions as satisfying the N.J.S.A. 34:11-56a25.2′s standard for the good-faith defense and granted summary judgment dismissing Branch's claims in 2019.

However, the trial court did not address whether Cream-O-Land constituted a "trucking industry employer" within the meaning of N.J.S.A. 34:11-56a4(f).

The Appellate Division reversed, finding that none of the three determinations on which Cream-O-Land relied met the requirements of the good-faith defense under the plain language of the WHL. The panel also rejected Cream-O-Land's invocation of a 2006 opinion letter by the director of the division stating that, for certain employees of trucking industry employers, N.J.S.A. 34:11-56a4 "establishes their overtime rate at 1 ½ times the minimum wage."

The Appellate Division said Cream-O-Land never indicated it had relied on the 2006 letter when determining its overtime compensation.
The Justices agreed, reasoning that the Legislature intended the WHL to protect employees from unfair wages and excessive hours, and that Cream-O-Land simply fell short in meeting the standards for the exemption to avert paying general overtime wages.

Employers "who plead and prove that they have proceeded in good faith in conformity with and reliance on certain actions by the Department or the Division" need to present a "written administrative regulation, order, ruling, approval or interpretation by the Commissioner ... or the Director," or "any administrative practice or enforcement policy of such department or bureau with respect to the class of employers to which he belonged," Patterson wrote.

"None of the decisions cited by defendant was issued by the Commissioner or the Director; nor did they constitute an administrative practice or enforcement policy addressing the class of employers to which defendant belonged"--the twin prongs of the WHL, said Patterson in the 34-page opinion.

Patterson said the 2006 opinion letter cited by Cream-O-Land by the labor department director about the Wage and Hour Law's application to overtime wages in the trucking industry was never issued to the company and was unrelated to this appeal.

"Affirmed as modified. The matter is remanded to the trial court," said Patterson.

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