Labor Department would ignore law to change overtime rules

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I submitted a comment on behalf of the Competitive Enterprise Institute to the Wage and Hour Division of the Department of Labor (DOL) regarding its proposal to amend regulations governing an exemption to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). The exemption, sometimes called the EAP exemption, applies to “any employee employed in a bona fide executive, administrative, or professional capacity.”

The proposal is an effort to reduce the number of employees within the exemption. In practical terms, it seeks to make the minimum wage and overtime requirements of the FLSA cover more employees, thus increasing the power of the Wage and Hour Division and diminishing the liberty of employers and employees to set the terms of their employment contracts.

The proposal does this by revising one of the three tests that must be met for an employee to qualify for the EAP exemption, the salary level test. The salary level test requires an employee’s salary to exceed a specified amount, while the salary basis test requires the salary to be predetermined and fixed. The third test is the duties test, which focuses on the nature of the employee’s job responsibilities. The DOL proposes to increase the standard salary level and the salary level for highly compensated employees. It further proposes to increase both salary levels automatically every three years.

I pointed out in my comment that these proposals disregard the text of the statute. The standard salary level test has a dubious connection to the statute, which refers to the capacity in which employees are employed, not how much they are paid. The standard salary level test removes from the exemption employees whose salaries are below a certain amount even if they perform executive, administrative, or professional duties. The proposed 155% increase in the standard salary level would remove from the exemption professionals expressly listed in the statute (“any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools”) and millions of other professionals.

The automatic increases proposed by the rule also conflict with the text of the statute. The DOL proposes that every three years the secretary of labor update the standard salary level as well as the salary level for highly compensated employees based on data from the Bureau of Labor Statistics. The secretary is to do this simply by publishing a notice in the Federal Register.

The DOL’s preamble to its proposals repeats as if a mantra its reliance upon “the authority that the FLSA grants to the Secretary to define and delimit the EAP exemption.” But in its repetitions of the define-and-delimit mantra, the DOL omits the part where the FLSA says the terms of the exemption are to be defined and delimited “by regulations of the Secretary, subject to the provisions of subchapter II of chapter 5 of Title 5.” Those provisions, known as the Administrative Procedure Act, require regulations to be adopted through a procedure that gives the public a chance to submit comments on a proposed regulation and requires the agency to respond to significant comments. The DOL proposal to make future increases in the salary levels automatic violates the Administrative Procedure Act’s requirements.

All of this highlights one of the values of CEI’s regulatory comment program. Agencies become very familiar with provisions of law that empower them. They need to be reminded of the provisions that restrain them.

Read my comment on