National Urban League Response to DOL on Overtime Final Rule

Friday, September 22, 2017

Melissa Smith
Director of the Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor
200 Constitution Avenue N.W, Room S-3502
Washington, DC 20210

Re: RIN 1235-AA20, Comments in Response to Request for Information; Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees

Dear Ms. Smith:

On behalf of the National Urban League, I 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. As an historic civil rights and urban advocacy organization, the National Urban League is dedicated to economic empowerment in historically underserved urban communities. We are committed to promoting fairness in the workplace and supporting the economic security of working families. One of our key Empowerment Goals for 2025 is that “Every American has access to jobs with a living wage and good benefits.”

The Department released the 2016 Final Rule on the EAP exemptions following years of research, analysis, and deliberation, with ample opportunity for all stakeholders to participate in the process. The National Urban League submitted comments in strong support of the Department’s overtime regulations, joining the over 270,000 public comments—the vast majority supportive—that 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 The Final Rule updates outdated regulations, lowers the risk and costs of litigation by providing a bright line rule for businesses to follow and rely upon in shaping their overtime policies,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 dollars in their paychecks, which is in turn likely to stimulate consumer spending. African Americans, Latinos, women, workers under age 35, and workers with lower levels of education would all benefit the most from this updated rule. Revisiting the salary threshold is a waste of time and resources that 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.

First and foremost, we urge the Department of Labor 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 (Case 4:16-CV-731, 8/31/17). In this ruling, the court fundamentally misconstrues DOL’s authority to issue a salary threshold for the EAP exemptions and utterly failed to consider any of the vast economic analyses prepared by DOL in support of the Final Rule that was promulgated in 2016. Aside from any discussion of what the salary threshold should be, it is crucial that DOL’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. This 6.5 million represents nearly half (47%) of all salaried white collar employees who fail the duties test. The long-term institutional interest that DOL 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.

Second, 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. 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 DOL 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 DOL to leave the duties test alone, both during the extensive stakeholder engagement DOL conducted prior to issuing its proposed EAP rule, and time and time again in their comments submitted in response to the proposed rule. In deference to these stakeholders, DOL acceded to this request, but it necessitated the robust salary threshold promulgated and supported by extensive economic analysis.

As a final matter, fighting to implement the Final Rule is simply the right thing to do. Workers know that they are more productive than ever before, working harder than ever before, yet their wages are not keeping up with their labor and productivity. The current rule governing overtime pay is one of those rules that is rigged against the worker in the favor of corporate America and our constituents know that. They 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 so many worker comments filed in response to the RFI, imploring DOL to fight for the Final Rule.

The Final Rule would provide or strengthen overtime protections for key constituents of the National Urban League, where 1.6 million black workers would be eligible to receive a pay increase based on the Final Rule. Black workers make up 8.8 percent of the salaried workforce but 11.5% of all newly covered workers. About 2.1 million Hispanic workers would also benefit. The retail industry sector, industries where minorities in urban areas have penetrated in large numbers over the last three decades, would be especially affected by the 2016 Final Rule. Coupled with the reported increase in the minimum wage for employees in big box stores, plus minimum wage increases in a number of cities with large minority populations, the overtime rule should boost minority family income over the next few years. These actions will provide a key step forward towards reaching the goal of eliminating income inequality in the labor market.

The 2016 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 are entitled and which they need to support themselves and their families.

The National Urban League urges 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. The current regulations that govern overtime pay have not been updated in a meaningful way in four decades. Working families cannot wait any longer.

Sincerely,

Marc H. Morial
President and CEO
National Urban League

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