Update on the Department of Labor White Collar Exemption Revisions
There has been some activity recently regarding the U.S. Department of Labor’s (DOL) revisions to the white-collar exemptions. Let’s refresh your memory on what has happened to date… As you may recall, final rules were published by the DOL in May 2016 (2016 Rules) and were to go into effect on December 1, 2016. The 2016 Rules revised the salary requirements for the white-collar exemptions, among other things. Of course, there were law suits filed to prohibit the implementation of the 2016 Rules. All employers were working feverishly to implement the new rules and the Wage and Hour Division of the DOL created a lot of information for employers, which still can be found here. Then on November 22, 2016, U.S. District Court Judge Amos Mazzant issued a preliminary injunction and thus prohibited the DOL from implementing and enforcing the 2016 Rules. The U.S. Department of Justice (DOJ) then appealed the injunction on December 1, 2016. Then it seemed to go quiet for a while which is not surprising given the fact we had an administration change in Washington D.C.
Let’s first talk about the status of the litigation (State of Nevada, et al. v. United States Department of Labor, et al., No. 4:16-CV-00731). After requesting extensions, the DOJ filed a brief in the lawsuit on June 30, 2017. The DOJ decided to drop the appeal on some of the issues and really the only decision that they are appealing is whether or not the DOL has the rulemaking authority to set the salary level for the exemptions. So, what does that mean. The rules will not be implemented as they were issued.
Just this week, the DOL has issued a Request for Information (RFI) to the public to gather further information to determine how best to proceed with revisions to the rules. You can find the RFI here. All comments have to be submitted by September 25, 2017. This is consistent with public comments made by Secretary of Labor Acosta. He has indicated that there is a need to raise the salary levels but not to the extent in the final rules.
Let’s look at the RFI. It asks 11 questions and respondents do not need to answer all questions. A lot of the questions focus on the methodologies used over time to determine the salary for the exemptions and which approach should be used. Thus, I will provide a brief walk through time which is all included in the preamble to the 2016 Rules. It is important to note that from 1949 until 2004 there were two salary levels for each exemption. Positions that met a “short” duties test, which was less stringent, had a higher salary level to meet the exemption requirements while positions that met the full, or “long”, duties test had a lower salary level to meet the exemption requirements. The “long” test included a specific quantifiable amount of time that an exempt employee could spend on non-exempt duties to still meet the exemption. In 2004, the DOL decided to do away with the two tests and the new standard duties test, which we have today, is based on the prior “short” test and the salary level was set at $455 per week. The data used to set the salary level in 2004 was based on the Current Population Survey which included most salaried employees. The DOL then excluded the bottom 20%. I do not mean to bore you with all of this but to understand the questions in the RFI you need to know the prior methodologies.
Besides the questions about prior methodologies, the RFI asks whether the standard salary level set in the 2016 Rules effectively eclipses the duties test. The DOL also wants to know the steps that employers went through to implement the 2016 Rules. For instance, did an employer increase salaries in order to maintain exempt status, decrease non-exempt employees hours or change their implicit hourly rate so their pay would remain the same, or make other changes? Interestingly, the DOL asks if an exemption test that relied solely on a duties test without regard to salary would be a better test. The DOL does ask questions about the highly compensated exemption as well.
I know that many of my clients went through a very painful process to meet the 2016 Rules requirements. So, now is the time to speak up and have a voice. If you want to have input into the next revisions then you should respond to the RFI.
The picture I have included this week is of Iceberg Lake in Glacier National Park. We just returned from vacation in the park. It is spectacular! While we are sweating in the humidity in Arizona I thought a picture of cool waters would be nice.