Comment on notice of proposed rulemaking: Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees
Dear Ms. DeBisschop:
I am an attorney with the Competitive Enterprise Institute. I was a senior policy advisor in Department of Labor’s Wage and Hour Division in 2019. The Competitive Enterprise Institute is a non-profit research and advocacy organization that focuses on regulatory policy. On behalf of the Competitive Enterprise Institute, I submit to the Department of Labor (Department) the following comments regarding its proposed rule Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees, 88 Fed. Reg. 62,152 (proposed Sept. 8, 2023) (to be codified at 29 C.F.R. pt. 541). I shall comment first on the Department’s proposal to increase the standard salary level test and second on its proposal to automatically increase the salary level tests.
Proposed Increase in the Standard Salary Level Test
Section 13(a) of the Fair Labor Standards Act of 1938 (FLSA) exempts certain categories of employees from the act’s minimum wage and maximum hour requirements. The exempted categories involved in the proposed rule are those set forth in section 13(a)(1):
any 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, subject to the provisions of subchapter II of chapter 5 of Title 5, except that an employee of a retail or service establishment shall not be excluded from the definition of employee employed in a bona fide executive or administrative capacity because of the number of hours in his workweek which he devotes to activities not directly or closely related to the performance of executive or administrative activities, if less than 40 per centum of his hours worked in the workweek are devoted to such activities)[.]
29 U.S.C. § 213(a)(1).
The “capacity” in which employees are employed is addressed by the Department’s duties tests, which are found in 29 C.F.R. part 541, subparts A through F. The Department has an additional test that it now proposes to revise, the salary level test found in subpart G. Proposed section 541.600 would increase the standard salary level from $684 per week to $1,059 per week or $4,589 per month.
The salary level test concerns the pay and not the capacity of employees. That being the case, the question was raised in Nevada v. U.S. Department of Labor, 275 F. Supp. 3d 795 (E.D. Tex. 2017), whether the salary level test has any basis in the statute. The court examined the text of section 13(a)(1) and reviewed contemporaneous definitions of bona fide, executive, administrative, professional, and capacity. “After reading these plain meanings in conjunction with the statute,” the court concluded that “Congress defined the EAP exemption with regard to duties.” Id. at 805. The court held that “the plain meaning of Section 213(a)(1) does not provide for a salary requirement.” Id. at 806. More recently, Justice Kavanaugh made the same observation: “The Act focuses on whether the employee performs executive duties, not how much an employee is paid or how an employee is paid. So it is questionable whether the Department’s regulations—which look not only at an employee’s duties but also at how much an employee is paid and how an employee is paid—will survive if and when the regulations are challenged as inconsistent with the Act. It is especially dubious for the regulations to focus on how an employee is paid (for example, by salary, wage, commission, or bonus) to determine whether the employee is a bona fide executive.” Helix Energy Solutions Group, Inc. v. Hewitt, 598 U.S. 39, 67 (2023) (Kavanaugh, J., dissenting).
Although the Nevada court held that section 13(a)(1) does not provide for a salary requirement, it nonetheless added that “the Department has used a permissible minimum salary level as a test for identifying categories of employees Congress intended to exempt” and for screening out obviously nonexempt employees. 275 F. Supp. 3d at 806. But the court ruled that the Department cannot use a salary test that excludes from the exemption employees whose duties would exempt them. Id. at 806-9. It is undisputed that the current proposal would do just that. The Department admits that excluding from the exemption some employees who meet the duties test is a feature of any salary level test. 88 Fed. Reg. at 62,157.
The Department argues in defense of the salary level test that “[d]espite numerous amendments to the FLSA over the past 85 years, Congress has not restricted the Department’s use of the salary level tests.” Id. at 62,160, 62,178. That assertion is not entirely true. In 1966 Congress amended section 13(a)(1) in a way that is inconsistent with the Department’s position. It inserted after “professional capacity” the following: “(including any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools)”. Fair Labor Standards Amendments of 1966, Pub. L. 89-601, § 214, 80 Stat. 830, 837 (1966).
This amendment sheds light on the meaning of “professional capacity.” Under the principle of noscitur a sociis, “The meaning of a word may be enlarged or restrained, be made broader or narrower, by reference to the whole clause in which it is used.” 82 C.J.S. Statutes § 422 (2023). In this case, the phrase “including any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools” broadens the meaning of “professional capacity.” As an analogy, in City of Oakland v. Thompson, 91 P. 387 (Cal. 1907), the court held that the phrase “municipal improvements” in a statute was broadened by the adjacent language “including bridges, waterworks, water rights, sewers, light or power works, or plants, buildings for municipal purposes, school houses, fire apparatus” to encompass subjects “concerning which doubt might be entertained as to their proper place in such a category.” Id. at 388. To give an example, the court said, “it might be debatable in a town adequately supplied with light by a quasi public corporation whether the acquisition of a lighting plant by a city could, in strictness, be denominated a public improvement, and it was to relieve from any necessity of construction that light works, power works, waterworks, and water rights were expressly enumerated.” Id.
Similarly, in section 13(a)(1) the phrase “including any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools” broadens the scope of “professional capacity” to include professions, especially in the educational field, that are not necessarily compensated with high salaries. Such professions include librarians and media collection specialists, whose median weekly earnings in 2022 was $1,092.1 The Department’s proposed standard salary level of $1,059 a week would exclude about half of these professionals from the exemption.
Even though the Department has chosen not to apply its salary level test to teachers, 29 C.F.R. §§ 541.303(d), 541.600(c), teachers’ salaries should also be considered because this issue is one of statutory construction. The objective is to understand the meaning of “executive, administrative, or professional capacity” and to determine whether the proposed standard salary level gives proper effect to that meaning. Congress did not create a separate category of exemption for teachers and academic administrative personnel. Rather, it essentially said that employees employed in an executive, administrative, or professional capacity include elementary and secondary school teachers and academic administrative personnel. But contrary to the express language of the statute, the proposed standard salary level would define and delimit “professional capacity” to exclude elementary and secondary school teachers in many cases. In 2022 the annual mean wage for elementary school teachers in thirteen states was below $55,068, the annual wage yielded by the proposed monthly standard salary level of $4,589.2 The annual mean wage for secondary school teachers was below that figure in ten states.3 According to the National Education Association, the average teacher starting salary is $42,844.4
Read the full regulatory comment here: