By Janis Reyes, Assistant Chief Counsel
The Department of Labor’s overtime regulations are back! In September, the Department of Labor (DOL) held five public listening sessions on its overtime regulations in Atlanta, Seattle, Kansas City, Denver and Providence to obtain feedback from stakeholders. The agency just announced that it will hold another roundtable in Washington, D.C. on October 17, 2018. Click here to view details and to register.
I participated in these roundtables to provide small business feedback from Advocacy’s own roundtables and comment letters on this issue. I met with meeting rooms full of DOL officials and representatives from the business community, nonprofit organizations, academia and labor. There were members of Congress present and even a celebrity- Jane Fonda.
In 2016, DOL finalized a rule that changed the exemption from overtime requirements under the Fair Labor Standards Act (FLSA) for executive, administrative and professional workers, moving the threshold from a minimum salary level of $23,660 to $47,476. In November 2016, the rule was enjoined by a federal court before it became effective. DOL has received over 500,000 public comments on this issue, and the agency is scheduled to release a new rule on this issue in January 2019.
“DOL adopted this rule without taking into account the effect and real sustainability of small businesses. Applying laws broadly will hurt main street businesses,” said small business consultant Jeff Koenig at the roundtable in Kansas City, Missouri. Business representatives at these roundtables acknowledged that the salary threshold should be increased; however, they commented that DOL’s regulations doubling the salary threshold for exempt workers was too high and would have added significant compliance costs. Many businesses echoed Advocacy’s recommendation that DOL adopt a national salary threshold that reflects the regional differences in low wage states like the South and low wage industries like retail.
One business representative from a manufacturing firm noted that the wages of their employees at their locations in rural Alabama and Georgia are much lower than in the roundtable location of Atlanta. Jan Gee, the President and CEO of the Washington Food Industry Association, stated that independent grocery and convenience stores have the lowest profit margins of any industry, at only a 1.5 percent profit margin. David Streeter, from Washington Nonprofits, commented that there is a real anxiety within non-profits who do not have the resources to pay for these extra personnel costs.
Multiple employers stated that the high salary threshold in the 2016 rule resulted in owners and human resources professionals changing their workforce to comply with these rule and minimize possible overtime, by either raising their salaries above this threshold or reclassifying these employees as hourly employees. I discussed Advocacy’s recommendation that DOL provide at least 1 year to 18 month to comply with new regulations, as small businesses often do not have any human resources staff to help implement these changes to their workforce.
Most small business representatives at these roundtables stated that they would have reclassified their employees to an hourly position to minimize overtime pay under the 2016 final rules. In Providence, one representative from the National Federation of Independent Business stated that this transition from salaried to hourly pay would be considered a demotion for managers, who were accustomed to flexible schedules and certain job perks such as working from home. In Atlanta, the spouse of a restaurant manager stated that her husband receives calls at all hours and it would be burdensome to record and track these conversations. Many businesses from industries with non-traditional hours such as technology, staffing and hotels were also concerned about managing their workers’ time to avoid overtime costs. Businesses representatives also opposed an automatic increase of the salary threshold, as these updates may not reflect the economic conditions or allow for public input.
Worker advocates at all of the roundtables recommended that DOL “protect and advance” the 2016 final rule, and cited employer abuses of these overtime exemptions. In Seattle, Washington Congressional representatives Pramila Jayapal and Mark Takano also recommended that DOL adopt the 2016 final rule. These advocates also asked DOL to adopt the automatic increases.
It has been a great experience hearing from small businesses across the country at DOL’s Overtime Listening Sessions. Advocacy looks forward to getting more small business feedback in the upcoming months.
Janis Reyes is the Assistant Chief Counsel for Labor and Immigration. She can be reached at Janis.Reyes@sba.gov. She attended the DOL Overtime Listening Sessions in Atlanta, Seattle, Kansas City and Providence in September. Click on these links to read Advocacy’s Comment Letters on the DOL’s 2015 Proposed Rule and 2017 Request for Information.