New Jersey Appellate Court Defers to State Wage and Hour Division's Longstanding Interpretation of Exemption

On November 16, 2011, the New Jersey Appellate Division affirmed a finding that registered nurses who were paid on an hourly basis were exempt from the overtime requirements of the New Jersey Wage and Hour Law (“NJWHL”), even though the regulation applicable at the time only extended the “professional” exemption to employees compensated on a “salary or fee basis.”

In Anderson v. Phoenix Health Care, Inc., the court explained that while the regulation specifically provides that exempt professionals must be paid on a salary or fee basis, for the past 40 years the New Jersey Division of Wage and Hour Compliance’s enforcement policy had been “consistently administered” to extend the exemption to professionals paid on an hourly basis so long as their total weekly compensation exceeded the minimum set forth in the regulation. Deferring to the Division’s longstanding interpretation, the court stated that a change to such a longstanding policy must come from an amendment of the regulation or through the legislative process. In addition, the court found that the good faith exception would have applied even if the exemption was held not to apply to hourly-paid nurses. 

The long-term import of this decision for healthcare employers is unclear. As noted by the court in a footnote, on August 15, 2011, the regulation at issue in the case was superseded. Since the parties did not argue that the newly-adopted regulations applied, however, the court decided that it “need not determine whether nurses similarly situated as plaintiffs will in the future be entitled to overtime compensation.” The recently-enacted regulation adopts the provisions of the federal regulations regarding overtime exemptions (with certain exceptions not applicable here). Unlike the previous New Jersey regulations, the federal regulations contain detailed definitions of “salary basis” and “fee basis.” Further, Fact Sheet #17N by the U.S. Department of Labor's Wage and Hour Division advises that in order for nurses to qualify for the learned professional exemption, they “must be compensated on a salary or fee basis (as defined in the regulations).”

Thus, the most important lessons from Anderson are: (a) employers must remain vigilant in consistently monitoring both federal and state wage and hour laws; and (b) employers who are relying on an agency’s interpretation of applicable exemptions should be aware that courts may not always defer to the agency’s interpretation. While the employer in this case benefited from the court’s deference to the New Jersey Division of Wage and Hour Compliance’s longstanding interpretation of the exemption, other courts in other contexts have refused to defer to agency interpretations when they do not find support in the express terms of the statute or regulation.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.