In its Fair Labor Standards Act comment letter submitted to the Department of Labor (DOL) Wage & Hour Division on Tuesday, WorldatWork agreed with the DOL’s proposed overtime rule threshold but advocated for changes to the highly compensated employee threshold.
The DOL proposed to set the salary level at which an employee could be exempt from federal overtime and minimum wage requirements at $679 per week, or $35,308 per year, in early March. The figure represents a significant update to the current FLSA regulations where the threshold is at $455 per week or $23,660 annually but is significantly lower than the $47,476 annual ($913 per week) rate issued by the Obama Administration that never went into effect.
In its letter, WorldatWork said it believes the new proposed salary level is “reasonable and workable” and that using a consistent methodology to calculate the salary level is important.
“We need to avoid erratic changes to the required salary level, and we believe a consistent methodology helps avoid those disruptions,” wrote Scott Cawood, WorldatWork CEO, in the comment letter. “We do believe that the proposed standard will significantly assist employers and employees to efficiently identify exempt and nonexempt roles under the Fair Labor Standards Act.”
WorldatWork also strongly recommended keeping the federal standard salary level as a federal floor without regard to geographic location, employer size or any other factors.
“States and local municipalities can and do address geographic issues setting higher salary requirements or tests in locations where the local market demands higher wages,” Cawood wrote. “Adding a new federal layer of regional/geographic based salary levels would be extremely burdensome to multistate employers and would result in more situations where employees in the same job role or function are classified differently based solely on where they work. This causes a host of other complications regarding access to benefits, workplace flexibility options, discrimination allegations and more. The consequences far exceed the limited benefits of considering multiple salary level tests.”
WorldatWork disagrees with the DOL’s proposal to raise the salary level threshold for highly compensated employees (HCE). The DOL proposed to set the level equivalent to the 90th percentile of full-time salaried workers nationally, similarly projected forward to 2020, which results in an increase in the annual compensation level to $147,414 per year.
Instead, WorldatWork believes the DOL should set the HCE total annual compensation amount at an amount equal to annualized weekly earnings of the 80th percentile of full-time salaried workers nationally, which would be approximately $131,000 per year.
“We believe this figure will result in a far more workable standard, given the fluctuation in weekly earnings in different parts of the country and in different industries,” Cawood wrote.
“We also believe that the resulting compensation level would more effectively serve its purpose by identifying those individuals who should be eligible for a more relaxed duties test. By combining use of national data and a 90th percentile standard, the proposed rule generates an artificially inflated figure which undermines the entire purpose behind the HCE exemption.”
Other WorldatWork comment letter highlights:
- Periodic Updating: WorldatWork agrees with the DOL’s proposal to update the salary level every four years through notice-and-comment rulemaking.
- Incentive Payment Inclusion: WorldatWork agrees with the DOL’s proposal to permit nondiscretionary bonuses, incentives and commissions to satisfy up to 10% of the standard salary level test for the EAP exemptions, provided that such bonuses or payments are paid at least annually.
- Implementation: WorldatWork believes that 180 days or more is necessary to properly implement these proposed changes, as well as changes that may occur in the future in connection with these periodic updates.
About the Author
Brett Christie is a staff writer at WorldatWork.