DOL must uphold its mission to help workers
Employers can now exempt workers from overtime at a salary so low that 12 million are left in or near povertySeptember 25, 2017
Legal Aid at Work sent comments on Sept. 25 to Melissa Smith, with the Wage and Hour Division of the U.S. Department of Labor, urging implementation of an Obama administration directive to raise the salary minimum for exempt workers from $23,660 to $47,676 so those who work longer than 40 hours a week have a better chance of earning a living wage. (Download a PDF of our comments here.)
We urge the Department to uphold its mission “to foster, promote, and develop the welfare of the wage earners” of the United States by defending and maintaining the new salary threshold.
On behalf of Legal Aid at Work (“LAAW”), we write in response to the Department of Labor’s Request for Information: Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer employees. LAAW is a non-profit public interest legal services organization whose mission is to protect, preserve, and advance the workplace rights of individuals from traditionally under-represented communities. More specifically, LAAW’s Wage Protection Program empowers workers in low-wage industries to attain economic security for themselves and their families by enforcing wage protections through litigation, administrative representation, and other advocacy. In addition, the Wage Protection Program holds semi-monthly Wage Claim Clinics where we see a variety of wage and hour violations, many of which involve misclassified, salaried workers. Each story shares a universal trend: our client community works relentlessly in the most physically demanding jobs, often for far over 40 hours per week, and are still struggling to support their families on unfairly low salaries.
The 2016 Final Rule (“Final Rule”) will ensure that our low-wage worker client community is paid fairly for the essential work they tirelessly perform each day. These workers often work as much as 60 hours per week without any overtime pay, as many are misclassified, and paid a salary that leaves them and their families in poverty, regardless of how many hours they work. As a result, many of our clients dedicate the majority of their waking hours to their employers essentially for free and still bring home a salary that leaves their family in poverty; the Final Rule is essential in eliminating this daunting reality.
While LAAW advocated a more robust increase to the required salary level in 2015, the Final Rule was a strong step in the right direction. As such, we appreciate the opportunity to comment on the Final Rule again.
The Final Rule Should be Implemented
The Department of Labor (“Department”) released the Final Rule in 2016 on the executive, administrative , and professional (“EAP”) exemptions following years of research, analysis, and deliberation, with ample opportunity for all stakeholders to participate in the process. Over 270,000 public comments—the vast majority supportive—were submitted. The Final Rule updates outdated regulations, lowers the risk and costs of litigation by providing a bright line rule for businesses to follow and rely upon in shaping their overtime policies, and provides millions of modestly-paid workers with needed economic stability—and more wages in their pocket, which is in turn likely to stimulate consumer spending. Revisiting the salary threshold is a waste of time and resources and prioritizes the desires of corporate America above the needs of millions of working women and men who have already waited too long for the overtime pay they deserve.
We urge the Department to appeal the most recent ruling from the Eastern District of Texas in the case State of Nevada et al. v United States Department of Labor et al , No 4:16CV-73 (E.D. Tex. Aug. 31, 2017). In this ruling, the court fundamentally misconstrued DOL’s authority to issue a salary threshold for the EAP exemptions and utterly failed to consider any of the vast economic analysis prepared by DOL in support of the Final Rule. Aside from any discussion of what the salary threshold should be, it is crucial that the Department’s authority to issue economically supported regulations remain unassailable. In addition, the Court’s conclusion that the Rule is invalid because its salary level supplants an analysis of an employee’s job duties is belied by the record which showed that there are 6.5 million white-collar salaried workers earning above the standard salary threshold who fail the duties test, and therefore are overtime-eligible as a result of the application of that test. These 6.5 million workers represents nearly half (47%) of all salaried white collar employees. The long-term institutional interest that the Department has in its regulations facing legally appropriate review from the courts transcends this one particular set of regulations and therefore, we urge the Department to appeal this ruling to the Fifth Circuit.
A Fair Salary Floor is Essential for Employees.
When Congress passed the Fair Labor Standards Act (“FLSA”) in 1938, it did so to protect vulnerable workers from the abuses of their employers. Prior to the FLSA, the inequity in bargaining power between employers and employees was so great that employees often did not have a choice but to accede to the employer’s often unreasonable demands to work long hours in poor conditions. The FLSA was designed to intervene in this relationship and attempt to level the playing field. Congress stated the law’s purpose as to remedy “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.”1 Moreover, the FLSA has always provided “a national floor under which wage protections cannot drop.”2 Congress intended that states and municipalities might provide greater protections for employees where appropriate, but that the FLSA would serve as uniform, nationwide minimum standard for employee protection.
This uniformity is essential and will eliminate an employer’s confusion as to what floor applies, especially considering the current drastic disparity between the California and FLSA thresholds. With the current halt of the implementation of the Final Rule, California’s exemption rules are more protective than FLSA’s threshold. Unlike current federal law, which only requires that an employee make $455 per week to be exempt, California law requires that employees make at least twice the minimum wage to qualify for exemption.3 This requirement amounts to a salary of $840 per week or $43,680 per year.4 Moreover, California’s quantitative duties test requires that an employee spend 51% or more of their time on exempt activities. Yet, even under California’s more stringent standard, workers are all too often misclassified as exempt and are paid according to the federal threshold of $23,660, making the Final Rule’s $47,476 threshold a vital protection for workers throughout the country, including here in California. Increasing the threshold for the salary basis test is a simple, bright-line rule that will work toward ensuring employees are paid a fair salary.
Our low-wage worker client community, comprised of caregivers, cooks, janitors, construction workers, hospitality workers, and security guards, are often misclassified as exempt and paid a salary that falls far short of California’s threshold, perhaps due to confusion about the federal/state thresholds. This is a widespread practice in low-wage industries where overtime pay is arguably needed the most; yet, employers pay employees, who are over-worked and already struggling to support their families, an unfairly low salary to avoid overtime pay obligations. Raising the federal threshold for the salary basis test will automatically set a threshold for workers to be paid a more livable wage.
The $47,476 salary level is amply supported by economic analysis and is essential to restoring the effectiveness of the EAP exemption determination. By the time the Department released its proposed update to the overtime salary threshold in 2015, the applicable $23,660 threshold, set in 2004 without any mechanism for automatic increase, was below the poverty line for a family of four and covered just 8 percent of salaried workers; by comparison, the 1975 salary threshold covered 62 percent of salaried workers.
This is because as the economic analysis accompanying the Final Rule demonstrated, the 2004 revisions to the EAP Exemption (the “2004 Rule”) were fatally flawed. The traditional methodology for defining the EAP Exemption had been to pair a robust test of employee duties (the “Long Test”) with a relatively low salary-level test (the “Long-Test Salary Level”), and a less rigorous duties test (the “Short Test”) with a significantly higher salary-level test (the “Short-Test Salary Level”). In the 2004 Rule, however, the Department set a “standard” duties test by reference to the Short Test, but arrived at a “standard” salary-level test that was as low as the Long-Test Salary Level. This mismatch was not adequately justified by economic analysis and allowed, by the Department’s later estimation, well over 700,000 overtime-eligible employees to be misclassified as exempt under the EAP exemption.6 The Department corrected the mismatch by promulgating the 2016 Rule, which retains the Short Test as the standard duties test while returning to essentially a Short-Test Salary Level for the standard salary level.
Were the Department to revise the salary threshold downward in any meaningful fashion, it would serve to perpetuate this mismatch, necessitating a revision of the duties test in order to make it far more vigorous than it currently is. Businesses and their associations repeatedly implored the Department to leave the duties test alone, both during the extensive stakeholder engagement the Department conducted prior to issuing its proposed rule, and reiterated time and time again in their comments submitted in response to the proposed rule. In deference to these stakeholders, the Department acceded to this request, but it necessitated the robust salary threshold promulgated and supported by extensive economic analysis.
The Final Rule Will Have a Significant Effect on Low-Wage Workers
As a final matter, implementing the Final Rule is simply the right thing to do. Workers know that they are more productive than ever before, working as hard as ever, yet their wages are not keeping up with their labor and productivity. This is one of those rules that is rigged against the worker in the favor of corporate America. Most workers don’t mind putting in longer hours if they are going to be fairly compensated, but they also need more time with their families and for their personal lives rather than working for free for an employer who is taking advantage of the currently flimsy overtime regulation. That’s why there were so many favorable worker comments in response to the proposed rule in 2015, and that’s why there are already so many worker comments filed in response to the Request for Information, imploring the Department to fight for the Final Rule.
Of the nearly 12.5 million workers to whom overtime protection will be extended under the Final Rule, many of them share the characteristics of our low-wage worker clients. For example, for the nearly 12.5 million workers that this change will benefit, roughly 3.5 million of the workers do not have college degrees.7 By providing these workers with the overtime protections guaranteed by FLSA, the DOL is taking a strong step towards improving both the quality of life for current salaried workers and creating job opportunities for the unemployed.
Moreover, the Final Rule improves the quality of life for salaried workers. When employees are not forced to work long hours, they have more time to live their lives. Over 4.6 million affected employees are parents who will have more time to spend with their children. They, along with the rest of the affected employees, will have more time to engage in leisure activity, to exercise, and to do any of the myriad other things associated with a meaningful and dignified life. After all, low-wage workers are not automatons. They work in order to make money in order to live a meaningful life, and fewer working hours at their same salary goes a long way towards improving the quality of life for low-wage workers. In the alternative, in cases where employees do not see their hours decreased, many currently exempt workers will be paid the overtime premium that they deserve, allowing them to better support their families.
The Final Rule—and the salary threshold it established—was exhaustively researched, analyzed and commented on by thousands of experts, businesses and private citizens. It was crafted with the primary purpose of protecting working people and their families and is consistent with the Department’s traditional methodology, which reflects an inverse relationship between a demanding inquiry into work duties and a higher salary threshold. Lowering the threshold would result in stripping hard working men and women of the overtime protections to which they should be entitled and upon which they depend to support themselves and their families.
We urge the Department to uphold its mission “to foster, promote, and develop the welfare of the wage earners” of the United States by defending the Final Rule and maintaining the salary threshold established therein.