Labor Secretary Alexander Acosta has made a much needed course correction at the Department of Labor (DOL). During the past administration, federal regulators consistently issued costly rules, overreached their authority, and were slapped down by the courts. Now, the agency’s focus is to repeal regulation that “impinges on liberty,” as Acosta recently remarked.
Thus far, Acosta’s actions and public statements have focused on deregulation and job creation. At the start of his tenure, the DOL rescinded Administrator’s Interpretations relating to independent contractors and joint employer liability. This regulatory dark matter—bureaucratic activity that falls outside the formal rulemaking process—hamstrung flexible work arrangements and sought to punish large companies for contracting with smaller ones. Setting aside these impediments to job creation and entrepreneurship is a good start.
Acosta provided a principled reason for revoking regulatory dark matter at a recent American Bar Association conference: “It’s easy for the executive branch to say, ‘this is what we think,’ but that’s not how democracy works.” That is to say, government dictates should go through the formal rulemaking process so the regulated community has the opportunity to participate and receive advanced, detailed notice on potential policy changes. This is a crucial standard. Job creators need predictability and certainty from regulators.
But today, at a hearing before the House Committee on Education and the Workforce, Acosta was far more noncommittal on what the priorities of the DOL would be under his direction. During the hearing, Acosta did not emphasiz ethe need to deregulate.
Outside of expanding apprenticeship programs, Acosta was reluctant to show his cards on how the DOL would tackle important issues.
Prominently, the question of what to do with overtime requirements was generally left unanswered at the hearing.
Under the Obama administration, the DOL issued a misguided rule that raised the salary threshold for overtime eligible employees from $23,660 to $ $47,892, an increase of about 100 percent. However, the Eastern Texas U.S. District Court enjoined the overtime rule. In short, Judge Amos Mazzant ruled that the Obama administration:
… set the salary threshold for overtime eligibility so high that it supplanted what duties an employee performs. By making the salary level the predominant factor in determining exemption status, the court found that “because the Final Rule would exclude so many employees who perform exempt duties, the Department fails to carry out Congress’s unambiguous intent.”
In the ruling, the DOL’s authority to set a salary was put in question. This is because the Fair Labor Standards Act (FLSA) does not say anything about how much employees earn. Rather, exemptions from overtime pay predominantly focus on what duties an employee performs. Section 213(a)(1) of the FLSA states:
[A]ny employee employed in a bona fide executive, administrative, or professional capacity (including any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools), or in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary.)
The DOL is currently appealing the Texas District Court’s decision to make sure it has the authority to set a salary threshold.
Acosta’s comments at the hearing on the overtime controversy were brief and unenlightening as to how the DOL will act. He said that the overtime requirements have not been changed since 2004 and need to be updated. In previous statements, Acosta has hinted at setting the salary threshold around $33,000.
However, Bloomberg BNA reports that Acosta was more transparent on what changes to overtime requirements he may make at a private meeting at the U.S. Chamber of Commerce. Of note, Acosta is “considering automatically updating time-and-a-half pay requirements to keep pace with inflation.”
This is an odd provision to support considering Acosta’s comments on regulatory dark matter and his recent commentary in The Wall Street Journal, entitled, “Deregulators Must Follow the Law, So Regulators Will Too,” in which he stresses the importance of the rule of law:
This means federal agencies can act only as the law allows: The law sets limits on their power and establishes procedures they must follow when they regulate—or deregulate.
The Administrative Procedure Act is one of these laws. Congress had good reason to adopt it: In the modern world, regulations are akin in power to statutes, but agency heads are not elected. Thus, before an agency can regulate or deregulate, it must generally provide notice and seek public comment. The process ensures that all Americans—workers, small businesses, corporations, communities—have an opportunity to express their concerns before a rule is written or changed. Agency heads have a legal duty to consider all the views expressed before adopting a final rule.
Setting the overtime salary threshold on autopilot, where it automatically increases in line with inflation, undercuts the protections of the Administrative Procedure Act, of which Acosta speaks so highly. Workers, small businesses, corporations, and communities may never again have an opportunity to participate in public debate on what level the salary threshold should be set. Instead of giving the regulated community notice and ability to comment on a proposed change to overtime salary threshold, it would automatically rise.
Further, the FLSA is clear that the Labor Secretary is to issue regulation from time to time to make changes to overtime requirements, not simply put changes to overtime requirements on autopilot.
Hopefully, the DOL and Acosta stay true to his prior statements in favor of rolling back regulations that are impediments on liberty and respect for the rule of law.