What Employers SHOULD tell the DOL about their Proposed White-Collar Salary Threshold

I know, I know–I haven’t posted here in forever. What can I say? In-house life at a publicly-traded company is busy. I felt compelled to write something, though, because the Department of Labor is back with a new white-collar salary threshold of $35,308, and I couldn’t let my comments from 2016 be my last words on this subject.

A large law firm reached out to me this week to see if I would like to offer some comments that they could integrate into their anticipated comment to the DOL’s proposal. I considered two ideas:

1. Mr. Random In-House Employment Lawyer, when reached for comment, said “This is terrible micromanagement by DOL and it will compromise our ability to run our business and attract underpaid subservient automatons quality employees in Employer-Friendly Paradise, the mid-sized town where we’re headquartered.”
2. When reached for comment, Doug Hass, General Counsel of Lifeway Foods, expounded in detail, “Meh.”

Why #2? This salary level doesn’t impact us at all. Nope, not a single Lifeway exempt employee is paid less than $679/week.  We classify exempt employees honestly and pay them fairly, but this salary level shouldn’t impact many (if any) companies.  Save for possibly a very few rural or economically challenged areas of the country, the equivalent of $35,308 a year does not compensate someone fairly if they truly have the level of discretion and independent judgment necessary to meet the exempt duties tests under the FLSA.  Even in those very few areas I mentioned, the equivalent of $35,308 a year is still at best a reasonable wage for an exempt employee that you vest with exempt duties.  Looking at it from the other side, if you’re paying someone less than $679/week gross and claiming that they are exempt from overtime, your employee either works in Puerto Rico or American Samoa, or just isn’t that important to your business.

Note that I’m saying “the equivalent” of an annual salary.  That’s important because the FLSA’s salary level is based on weeks, not years.  An employee that makes $35,308 per year but whose salary does not always equal at least $679 per week would not meet the salary level test each week. More on that in #3 below.

This probably was not what the law firm was looking for, though, was it? Ahh…law firms can be so risk averse!

In-House Takeaways

Employers, think about submitting a comment about your industry and practices. Our comments do carry weight with the DOL, and often more so than advocacy groups and law firms. If you need help getting started, I would focus any comments on these three brief points:

1. This salary level is fine!  $455/week is too low.  $913/week (the Obama administration’s original proposal) is too high in some areas of the country.  $679/week is just right…for now.
2. Be pragmatic.  The DOL’s proposal omitted the Obama administration’s plan to index the salary level. The DOL proposal “affirm[s] its intention to propose increasing the earnings thresholds every four years” under future notice-and-comment rulemakings. Yuck! If DOL puts the automatic inflation increase back in (every 4 years is fine, no sooner), the regulation will be somewhat future-proofed and less likely to be jiggered with by future administrations (R or D).  Leaving this exercise–or explicitly encouraging future DOL leadership to engage in this exercise–to NPRMs will further transform the DOL into the next NLRB where every administration whipsaws employers and employees back and forth with different rules.  My suggestion: Pick a level that can run on autopilot that everyone is likely to live with.
3. Eliminate the bonus substitution rule. 10% of $679/week doesn’t (well, shouldn’t) matter to any real world employer.  More importantly, this proposal just plain doesn’t make sense because it undermines the weekly nature of the salary level in the regulations.  If DOL doesn’t eliminate this, I would tell my fellow in-house attorneys and HR practitioners to simply ignore it.  The potential pitfalls of miscalculating or undercompensating employees at the end of a year far outweigh the risk of simply paying an extra $67 per week.  That’s really all we’re talking about.  If $67 per week (or $135 every bi-weekly pay period) makes that much of a difference, then see my comment above about whether this employee is actually exempt.

As for posts here at The Day Shift, I will do my best to be active going forward.