WASHINGTON, September 25, 2017 – The National Retail Federation told the Department of Labor today that the Obama administration set the threshold for exemption from overtime too high in regulations struck down by a federal judge this summer and that any new level adopted under President Trump should be lower and account for regional and industry differences.
“NRF strongly opposed the final rule’s attempt to raise employee wages by executive fiat and its significant increase in the regulatory burdens on employers,” NRF President and CEO Matthew Shay said. “The drastic increase to the standard salary level imposed by the final rule ignored economic reality and would have resulted in major negative consequences for employees, employers and the economy as a whole.”
“Accordingly, NRF believes that this is an appropriate time for DOL to address many of the flaws in the final rule and to bring the (exemption) tests up to speed with today’s economy,” Shay said.
Shay’s comments came in a formal response to today’s DOL deadline for input as the agency considers whether to draft a new overtime update.
Under rules that were set to take effect last December, most workers making up to $47,476 a year would have automatically qualified for overtime when working more than 40 hours a week, up from $23,660 set in 2004. Those making more can be declared exempt, but only if they meet standards such as spending most of their time supervising other workers. By more than doubling the threshold to an “artificially high” level, however, NRF said the new rules would have required that millions of retail industry managers and other professionals from purchasing agents to accountants be paid overtime regardless of their job duties.
A U.S. District Court judge issued an injunction against the rules before they could take effect and overturned them altogether this August. The judge agreed with NRF and other plaintiffs who sued over the regulations, saying federal law is clear that whether workers must be paid overtime should depend on whether they qualify as exempt executives, professionals and administrators, not how much they are paid.
DOL chose not to appeal the August ruling, leaving the 2004 salary level and rules in effect for the immediate future.
In today’s letter, NRF said the complicated formula DOL used to arrive at the $47,476 figure was “arbitrary, fails to properly account for the importance of lower-wage industries in the modern economy and regional cost-of-living differences.” If DOL issues new overtime rules, NRF said it should use the 2004 methodology, which based calculations on salaries in the south, which is the nation’s lowest-paid geographic region, and in the retail industry, which is the nation’s largest private-sector employer.
“Applying the 2004 methodology would continue to allow the compensation threshold to serve as a gatekeeper weeding out clearly non-exempt positions, yet not automatically disqualifying individuals who are primarily performing exempt duties,” Shay said.
Last year’s regulations would have automatically increased the salary level every three years, but Shay said any new regulations should not include an automatic update. He also said that a worker’s full compensation – including bonuses, commissions, incentive pay and other income – should be considered in determining whether the level is met.
NRF said there should be no change to current tests on how much non-management work such as helping customers that managers can do and remain exempt from overtime. “When managers perform such duties, they are still in charge of the operations and are responsible for the success or failure of the operations,” Shay said. “Regardless of what a manager’s hands might be doing at a given moment, managers are always observing and directing.”
Research conducted for NRF by Oxford Economics found that the 2016 regulations would have forced many employers to reclassify employees and limit hours or cut base pay to make up for added payroll costs, leaving most workers with no increase in take-home pay despite added administrative costs. The changes would also have decreased workplace flexibility, curtailed career advancement opportunities and damaged employee morale.
NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF.com
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