Update on Salary Increase for the FLSA White-Collar Exemptions
On March 17, 2016, Representatives Walberg and Kline proposed a new bill, HR 4773 entitled “Protecting Workplace Advancement and Opportunity Act,” which is intended to nullify the proposed Department of Labor (“DOL”) rule that is set to raise the salary basis from $23,660 per year to $50,440 per year.
The bill asks Congress to make the following findings:
1) That the new salary requirements would be:
- a) a 113 percent increase during the first year after the final rule takes effect from the salary threshold in effect on February 29, 2016; and
- b) an increase that would set the federal minimum salary threshold 20 percent higher than the minimum salary threshold under any state law effective on the date of enactment of this Act;
2) That the cost of compliance with the July 6, 2015 proposed rule was underestimated.
3) That the initial regulatory flexibility analysis of the proposed rule “failed to adequately identify the number of small entities affected by such rule and failed to address how such rule would affect regions with lower costs of living and differences in certain industries.”
Specifically, comments to the proposed rule asked the DOL to:
- Reanalyze “‘the economic impact of the rule on small businesses,’ to ‘provide a more accurate estimate of the small entities impacted by [the proposed rule],’and to ‘include an analysis of industry sub-sectors, regional difference, and revenue sizes.’”
- Reanalyze the “‘number of small non-profit organizations and small governmental jurisdictions * * * that are affected by this rule and the economic impact of this rule on these entities’”; and
- “Provide greater transparency with respect to ‘compliance cost data’ and to ‘utilize data provided in the comment process to accurately estimate the human resources and financial management costs of this regulation.’”
4) The DOL did not consider the impact of the new rule on the ability of employees who are reclassified from exempt to non-exempt employees to participate in workplace flexibility arrangements and programs.
5) The DOL did not analyze the potential impact of the rule on companies that operate in multiple states with different cost of living and salary scales, and the costs and unique complications for these employers associated with reclassifying employees in multiple states.
6) The DOL does not have authority to increase the salary basis on a yearly basis without participating in notice and comment rulemaking with respect to each change.
7) Any change in the duties test in the Final Rule that was not previously vetted with the public by providing notice and comment for the specific revisions would violate the notice and comment provisions of the U.S. Code.
The bill was recently introduced and is currently before the U.S. House Committee on Education and the Workforce. One person who testified in favor of the new bill was Nancy McKeague, SHRM-SCP, senior vice president and chief of staff at Michigan Health and Hospital Association (MHA). She noted the significant problems that this large and sudden salary increase would have on employers. As reported by SHRM, one issue that she raised was that the new increased salary amount “will likely cause compression issues with entry-level and midlevel employees’ salaries nearing the level of their managers.”
Keep a lookout for further news on this bill, as the DOL has stated that it is targeting July 2016 as the release date for the rule. Once the final rule is issued, if this bill is unsuccessful, then employers will have 60 days to comply with the new rules.
- Jean Ohman BackOf Counsel