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PPWO Urges Congressional Support of Overtime Pay Flexibility Act to Nullify DOL’s Ill-Considered and Ill-Advised Overtime Rule

On March 7, the Partnership to Protect Workplace Opportunity and 84 employer organizations sent a letter to Congress urging support of H.R. 7367, the Overtime Pay Flexibility Act, which would prohibit the Department of Labor from finalizing, implementing, or enforcing its proposed overtime pay rulemaking.

If allowed to go into effect, DOL’s rule will negatively impact employers from all sectors and force millions of workers to lose access to critical benefits, their hard-fought status in the workplace, opportunities for career advancement, flexible work arrangements, and potentially their jobs entirely.

The Overtime Pay Flexibility Act would protect workers, American businesses, and the economy from this disastrous policy. We urge Congress to pass this much-needed legislation and require DOL to abandon this misguided rulemaking and go back to the drawing board if it wishes to make changes to the overtime regulations.

PPWO Submits Comments Responding to DOL’s Proposed Rulemaking on Overtime

Today, the Partnership to Protect Workplace Opportunity (PPWO) and 244 national, state, and local organizations representing employers from a wide range of private industry and public, nonprofit and education sectors filed comments urging the U.S. Department of Labor (DOL or “Department”) to abandon the agency’s proposed 69 percent increase to the minimum salary an employee must receive to qualify as a “white collar” employee exempt from federal overtime pay requirements under the Fair Labor Standards Act (FLSA). While the Biden Administration announced in December of 2021 that it was contemplating an increase to the minimum salary for white collar      exemptions, the Department did not announce the proposed salary level until September 8 of this year, when the agency issued a Notice of Proposed Rulemaking that proposes an increase from the current minimum of $35,568 annually, which was set in 2019, to a projected minimum of $60,209 annually. The Department has based the proposal on a formula that sets the proposed minimum to the 35th percentile of earnings for all full-time salaried workers in the lowest-wage Census Region at the time the final rule is published. The Department has also proposed automatically increasing the minimum salary every 3 years by pegging it to the 35th percentile formula.

The Department only provided the public with 60 days to comment on the proposed rule, even though hundreds of stakeholders asked the Department for more time to comment. In addition, the Department’s proposal would only allow employers 60 days to implement the changes following release of a final rule, even though by the agency’s own estimate, 3.6 million workers who are currently exempt white collar workers make less than $60,209. For each of these 3.6 million workers, employers will need to determine whether to raise an employee’s salary to meet the new threshold, reclassify them as hourly, or restructure the job or department and distribute work differently, which may result in reductions in force. Oxford Economics, which evaluated the rule on behalf of the National Retail Federation, estimates far more workers–as many as 7.2 million–would be impacted by the Department’s proposed increase. Based on the Department’s timetables, PPWO estimates DOL could issue the final rule as early as March 1, 2024, and employers would need to implement the changes as early as May 1, 2024.

Top line issues raised in PPWO’s Comments:

Employees Will Have Fewer Opportunities for Flexible and Remote Work and Career Development The Department’s proposed rapid increase to the minimum salary level would result in the vast majority of impacted employees being reclassified as “hourly” or “non-exempt” employees. According to the Department’s own estimate, 3.6 million currently exempt workers make less than the proposed minimum. This number will expand exponentially over the years if the Department implements its proposed automatic updates. Reclassification has many negative ramifications for employees. “Hourly” or “nonexempt” employees must be paid for each hour worked and, for all hours worked over 40 in a given workweek, at a rate of one and a half times an employee’s regular pay rate (this premium pay rate is known as “overtime pay”). To ensure employees are paid for all hours worked and at the proper rate for overtime, employers must carefully track the hours nonexempt employees work. As a result, employers will necessarily avoid situations where tracking nonexempt employees’ hours is difficult or impossible so as not to accidentally violate the FLSA and face significant per-employee      liability. This means hourly employees have fewer opportunities to work flexibly and remotely. They also have fewer opportunities for workforce development, such as participating in training, seminars, or conferences that occur outside normal business hours. 

Employees Will Have Fewer Opportunities for Part-Time Work In addition, the regulations do not allow for pro-rating the salary threshold, so far fewer employees would be eligible for part-time exempt positions. For example, a part-time employee working a 50 percent schedule can now qualify as exempt so long as they work in a position that has a full-time salary of approximately $72,000 per year. This is true not because the full-time equivalent salary is $72,000, but because the half-time salary of $36,000 is still in excess of the regulatory minimum. Instead, in the first year under the Department’s proposal, an employee working a 50 percent schedule would need to be working in a position earning more than $120,500 on a full-time basis.

Most Employees Will Not Receive Additional Compensation, and Some Employees May See a Reduction in Pay While hourly employees are eligible for overtime pay, employers will schedule work in a manner to avoid the premium and unpredictable costs of having employees work overtime. As a result, employees may work less and get paid less. In addition, when employees are converted to non-exempt status, they often find that they have lost their ability to earn incentive pay. Under existing rules for calculating overtime rates for hourly workers, many incentive payments must be included in a non-exempt employee’s “regular rate” (i.e., the base rate for overtime) of pay. Faced with the difficult calculation (and recalculation) of these overtime rates—sometimes looking back over every pay period in a year—employers often simply forgo these types of incentive payments to nonexempt employees rather than attempt to perform the required calculations.

Businesses, Nonprofits, Schools, Local Governments and Workers in Rural and other Low-Cost Areas Will be Hit the Hardest The Department’s dramatic increase will impact rural and lower-cost regions the most. For example, in ten job categories in which the Department assumes employees are highly likely (90 to 100 percent) to pass the duties test, between 24 and 40 percent of them on a national basis will fail to meet the Proposed Rule’s increased salary threshold. With respect to employees in the South and Midwest Census regions, that range increases to 28 to 48 percent—almost half. And with respect to employees working in the South and Midwest regions outside large metro areas, somewhere between 34 and 70 percent of workers will fail to meet the increased salary threshold. This effective elimination of the exemption for certain low-cost-of-living areas of the country makes clear that the Department is once again exceeding its statutory authority. Congress directed the Department to define and delimit the terms in the statute; it cannot possibly have meant that the Department should effectively eliminate the exemption in certain regions. 

The Department’s Proposed Rule Is Unlikely to Withstand Judicial Scrutiny In 2016, the Department promulgated a final rule (the “2016 Final Rule”) which pegged the white-     collar exemption threshold to the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region (the South). The 2016 Final Rule was challenged in the U.S. District Court for the Eastern District of Texas. The court found that “Congress did not intend salary to categorically exclude an employee with executive, administrative, or professional capacity duties from the exemption” and permanently enjoined the 2016 Final Rule on September 1, 2017. 

PPWO Comment Letter on Overtime

PPWO to Congress: DOL Should Withdraw Overtime Rulemaking

On October 24, 2023 PPWO and 87 organizations representing private, public, nonprofit, and educational entities sent letters to House and Senate lawmakers requesting that they urge the Department of Labor’s Wage and Hour Division to withdraw its proposed overtime pay regulations. The Department has proposed to increase the minimum salary level that an employee must receive to be exempt from federal overtime pay by an overwhelming 70 percent and has additionally proposed to automatically increase the salary level every three years. This proposal comes despite the Department updating the minimum salary level just four years ago in 2019, and the new proposed salary level is effectively 154 percent higher than the threshold that was in place prior to that 2019 update.

As the letters note, “the Department has not provided adequate justification for the proposed increase and automatic updates, both of which are unlawful, inconsistent with historic norms, and will harm businesses, nonprofits, colleges and universities, states, cities, towns and public schools as well as the workers they employ and the consumers, students and people they serve.” Moreover:
  • The Department provided a mere 60 days for the public to submit comments on the proposal, despite receiving extension requests from PPWO and hundreds of additional associations. As those requests noted, 60 days is insufficient for stakeholders to collect necessary and comprehensive data on the proposal’s implications — including which employees will be impacted; what those impacts will mean for workers, entities, and consumers; and what alternatives the Department could consider.
  • The Department’s increase is unnecessary and unprecedented. The Department has updated the salary level eight times since 1938 (on average, every 9.87 years) and increases have ranged from 5 to 50 percent. Increases have never come close to approaching 154 percent.
  • The proposal’s costs will largely be borne by entry level workers in rural and economically stressed regions as well as those graduating with degrees that do not conventionally command high salaries given that organizations will face exorbitant transition and operational costs that will require headcount and service reductions.
  • Automatic updates to the salary level will impose significant inflationary pressure on the economy at a time when rising costs have already proven detrimental.

PPWO Reiterates Concerns with Anticipated Overtime Rulemaking

On May 25, 2023, the Partnership to Protect Workplace Opportunity and 104 employer organizations that represent a wide range of stakeholders from the private, public, and education sectors sent a letter to DOL urging the agency to abandon or at least postpone issuance of its anticipated proposed rulemaking altering the overtime regulations under the FLSA.

As we explain in the letter, “Even though the COVID-19 public health emergency has been lifted, concerns with supply chain disruptions, workforce shortages, inflationary pressures, and the shifting dynamics of the American workforce persist, and any rule change now would threaten a particularly vulnerable and recovering economy.”

Employer Community Calls on DOL to Hold Stakeholder Meetings Before Developing, Issuing New Overtime Proposal

On January 25, 2022, 110 employer organizations sent a letter to Secretary of Labor Marty Walsh urging the Department of Labor (DOL) to hold stakeholder meetings prior to the development and issuance of its anticipated proposed rulemaking on the “white collar” exemptions to the overtime regulations under the Fair Labor Standards Act.

In the letter the organizations explain, “This will be a significant rulemaking with respect to cost, difficulty in implementation and impact on the workforce, particularly given the current acute labor shortages. Our organizations urge DOL to follow past precedents and hold meetings with the regulated community to obtain input on the potential impact of any changes to the overtime exemption requirements.”

DOL would benefit from stakeholder input on the current economic situation and the potential impact new overtime regulations could have on the workforce and economy. Past administrations have held such meetings, and the employer organizations strongly urge the Biden DOL to follow suit. Given the vast increases in remote work and concerns around historic increases in inflation, it is particularly important for DOL to gather input before issuing a proposed regulation.

PPWO Submits Comments Responding to DOL’s Proposed Rulemaking on Regular Rate of Pay

PPWO Submits Comments Responding to DOL’s Proposed Rulemaking on Overtime

On May 21st, the Partnership to Protect Workplace Opportunity submitted comments to the U.S. Department of Labor responding to the proposed rulemaking that was issued on March 22, 2019.

PPWO Comment Letter

 

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PPWO Submits Comments Responding to PA’s Proposed Rulemaking on Overtime

On August 22nd, the Partnership to Protect Workplace Opportunity submitted comments to Pennsylvania’s Department of Labor and Industry responding to the proposed rulemaking that was issued on June 23, 2018.

PPWO’s comment letter.

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PPWO Submits Comments Responding to DOL’s RFI on Overtime

On September 25, the Partnership to Protect Workplace Opportunity submitted comments to the Department of Labor responding to the Request for Information that was published in the federal register on July 26, 2017.

PPWO Comment Letter on RFI

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PPWO Congratulates Secretary Acosta, Reiterates Concern With Update

On June 16th, the Partnership to Protect Workplace Opportunity sent a letter to Secretary of Labor Alexander Acosta congratulating him on his recent confirmation as well as reiterating concern with the salary threshold update.

PPWO Secretary Acosta Letter