On January 10, 2024, The Department of Labor published its final rulemaking altering the criteria for determining worker status as an independent contractor or employee under the Fair Labor Standard Act (FLSA). The final rule applies a multifactor test, where six different factors are considered holistically and could be determinative of a worker’s classification. This is a shift from the 2021 rule which identified two “core” factors that guided worker classification determinations: the nature and degree of the worker’s control over the work; and the worker’s opportunity for profit or loss. The final rule will go into effect on March 11, 2024.
“We’re disappointed DOL has finalized this rulemaking despite repeated requests from independent contractors, small businesses, and the regulated community to continue classification under the 2021 rule’s methodology,” said Josh Ulman, spokesman for the Partnership to Protect Workplace Opportunity. “The new multifactor test will just make it more difficult for workers to be classified as independent contractors.”
“The DOL is taking autonomy away from workers who prefer the flexibility and independence of independent contractor work arrangements. The majority of independent contractors including women, older Americans, and entrepreneurs would rather work independently than as traditional employees because it allows them to work around home conflicts, health issues, and other jobs. Reclassifying these workers would take away valuable employment opportunities.”
“This rulemaking will lead to a decline in employment. It will reduce opportunities for independent contractors, limit access to affordable project-based labor, and put small businesses reliant on contractors out of business.”
On August 30, 2023, the Department of Labor issued its notice of proposed rulemaking altering the overtime pay regulations under the Fair Labor Standards Act. The proposal increases the minimum salary threshold and automatically updates the threshold every three years.
“We’re disappointed DOL has decided to move forward despite repeated requests from PPWO and the regulated community to abandon or at least delay the rulemaking until the economy stabilizes,” said Josh Ulman, spokesman for the Partnership to Protect Workplace Opportunity. “Right now, we’re still recovering from the COVID-19 pandemic’s impact as we face continued inflationary pressure as well as a cooling job market.
“DOL is proposing a nearly 55% increase to the minimum salary threshold. Massive increases in labor costs like this simply cannot be absorbed by businesses. Meanwhile, automatic increases are unlawful and will set up the economy for failure, as increases will occur regardless of economic circumstances, exacerbating any problems that may exist.
“This rulemaking will lead to a substantial reduction in access to entry level executive, administrative, and professional salaried positions. It will reduce opportunities, especially for recent graduates and younger professionals hoping to begin their careers.
“All in all, this is poorly timed and will do harm to those it intends to help.”
Partnership to Protect Workplace Opportunity Co-Chair Lisa Horn had the following statement on the House Small Business Committee’s hearing, “Damaging Repercussions: DOL’s Overtime Rule, Small Employers, and their Employees:”
We commend Chairman Chabot and the members of the House Small Business Committee for holding today’s hearing to highlight the overwhelming negative consequences of the Department of Labor’s recently issued overtime regulation. The Committee’s interest is most welcome, as this regulation has quickly become the overriding concern of small businesses, nonprofits, public sector employers, and educational institutions across the country.
These employers are facing challenging and painful decisions as they try to meet the extraordinary demands of the new regulation. The new salary threshold for determining overtime pay eligibility is more than double the previous level ($47,476 from $23,660), and employers are struggling to absorb such a drastic increase.
As a result of this misguided regulation, many currently exempt, salaried professional employees will have to be reclassified as hourly wage earners–a change that is frequently considered a demotion. Employers will have no choice but to limit employees’ hours to less than 40 per week and reduce access to training opportunities and workplace flexibility. In many cases, employers will be forced to cut critical programming, staffing, and services. In the nonprofit sector, this could mean providing fewer life-saving and other desperately needed services for vulnerable populations.
We are pleased that today’s hearing will shed light on the serious hardships the new overtime regulation imposes on employers, their employees, and the people and communities that they serve.
On June 9, 2016, the Partnership for Workplace Opportunity submitted a letter for the record to the House Committee on Education and the Workforce for the hearing entitled “The Administration’s Overtime Rule and Its Consequences for Workers, Students, Nonprofits, and Small Businesses.”
The letter asks all the members of the Committee on Education and the Workforce to cosponsor H.R. 4773, the “Protecting Workplace Advancement and Opportunity Act”, which would require the Labor Department to conduct a detailed economic analysis before making dramatic changes to federal overtime pay requirements, and would prohibit any automatic increases.
You can read the letter here: PPWO Letter to House Education and Workforce Committee
A statement from the Partnership to Protect Workplace Opportunity (PPWO) about the Labor Department’s final overtime rule:
The public record surrounding the rule is filled with comments, economic analysis, letters from Congress, and meetings and phone calls urging the administration to reconsider its proposal and more carefully examine the potential impact before proceeding. We are deeply disappointed that the Labor Department largely ignored the concerns of tens of thousands of individuals and organizations across this country that expressed concern with the proposal. The final rule increases the salary threshold for overtime eligibility to $47,476 – instead of the $50,440 figure originally proposed. However, this token reduction in the salary threshold is still a 100% increase that will take place all at once in December. Employers will not be able to absorb this increase, particularly in such a short time frame, and DOL’s token reduction will not alleviate the harm this rule will do to these small businesses, nonprofits, colleges and universities, and local governments across the country, their employees and the people and communities that they serve.
Employees and employers – many of which are still unaware of this rule – will be hit hard when it is implemented. Costs will soon increase for organizations operating on fixed budgets, forcing them to cut critical programming, staffing, and services. Millions of employees across the country will be reclassified from salaried to hourly workers and begin experiencing reduced opportunity and flexibility in the workplace. Further, the rule’s automatic increases ignore wider economic variables or the reality of organizations and their specific budgetary constraints. These automatic updates threaten to impose serious hardships on public and private sector employers and employees without regard to economic circumstance of the time, which will have damaging consequences for the communities they serve.
While the nation’s overtime rules should be updated, today’s final rule will do serious damage to people’s careers and workplace flexibility, new job opportunities and essential community services. We will continue to advocate for a regulation that is considerate of all stakeholder and economic realities facing employers and employees across the country. We urge Members of Congress to support the Protecting Workplace Advancement and Opportunity Act.
– Lisa Horn, PPWO spokesperson and director of congressional affairs at the Society for Human Resource Management.
This is still a 99% increase. A token reduction will not alleviate the harm this rule will do to nonprofits, colleges, and small businesses and their employees. Moreover, the salary threshold must take into account regional differences in cost of living, which the current Labor Department approach does not. We’re encouraged by reports that the Labor Department is beginning to listen to the outcry from the nonprofit, higher education, and small business communities, but this rule needs a comprehensive reevaluation before it is released, else we risk doing serious damage to precisely the organizations and workers we all want to thrive,” said Lisa Horn, spokeswoman for the Partnership to Protect Workplace Opportunity (PPWO), a coalition of more than 70 organizations representing the broad employer community.
Today, the Partnership to Protect Workplace Opportunity released a new video featuring the voices of non-profits, higher education, small businesses, and employees who would be adversely affected by the Department of Labor’s proposed rule change for overtime.
Watch the video below:
Today, 139 national organizations and 201 regional, state, and local organizations joined letters urging Members of Congress to support legislation that would require the Labor Department to conduct a detailed economic analysis before making dramatic changes to federal overtime pay requirements. The letters, which were spearheaded by the Partnership to Protect Workplace Opportunity (PPWO), ask members of congress to cosponsor S. 2707/ H.R. 4773, the Protecting Workplace Advancement and Opportunity Act. The legislation would require that the department conduct a comprehensive analysis of the impact on career development and workplace flexibility and on small businesses, nonprofits, and local governments before moving forward with its proposed changes. The letters are supported and co-signed by representatives of nonprofits, institutions of higher education, schools, cities and counties and small and large businesses across the country, all of which are concerned about the unintentional damage DOL’s proposal would cause to workers, employers, and the U.S. economy.
“Labor Department’s proposal would not only result in an estimated cost of $8.4 billion per year, but will reduce opportunity and flexibility for millions of executive, professional, and administrative employees—particularly those at the beginning of their career. Statements by DOL officials suggest the Department plans to ignore the tens of thousands of comments asking it to reconsider the proposal. As a result, Congress must act and force the department to examine more closely the impact of the drastic and immediate increase and consider less harmful alternatives,” said Lisa Horn, a spokeswoman for the Partnership to Protect Workplace Opportunity (PPWO).
While the Partnership to Protect Workplace Opportunity is not taking a position on Chairman Rob Bishop’s discussion draft of the legislation to restructure Puerto Rico’s debt, PPWO released the following statement in reaction to section 410 (p. 87) of the legislation, which would exempt the territory from the Department of Labor’s proposed 113% increase to the salary threshold for exemptions to overtime pay requirements for white collar employees:
The recently released draft debt restructuring package for Puerto Rico contains a provision exempting the government and businesses operating in the territory from the Department of Labor’s pending overtime rule. The exemption highlights the significant consequences the rule will have on employees and employers in lower cost-of-living regions of the country and in many sectors of the economy. The DOL overtime rule will significantly and negatively impact not only Puerto Rico, but also nonprofits, local governments, institutions of higher education, small businesses, and others operating around the United States. It is imperative that DOL reconsider its overtime proposal before it is put into law, which is why PPWO supports this exemption requested by the Puerto Rican government and employers from a wide range of industries operating in the territory. PPWO urges the Administration and Labor Department to re-examine the overtime proposal in light of the tens of thousands of comments asking them to do so. We also ask Members of Congress to support the Protecting Workplace Advancement and Opportunity Act (S.2707/H.R.4773), which would require the Department of Labor to more closely examine the impact of changes to the overtime regulations before moving forward with a rule.
The exemption was requested in the comments to DOL on the proposed increase to the salary threshold filed by the Puerto Rican government, the Puerto Rican Chamber of Commerce, associations representing hotels and tourism, manufacturers, bankers, HR professionals as well as local restaurants and cleaners operating in the territory.