Finance

Trump's DOL should stop protecting bad Obama-era policy

The Department of Labor (DOL) has finally sent the White House its draft regulation on the standard for the "white collar" overtime exemptions, and it's about time. 

This issue has been rankling business and labor groups for several years, and the Trump administration has been surprisingly slow to clarify the appropriate salary level for exemption of executive, administrative and professional employees.

But for this to be a case of better late than never, the DOL must move quickly to release the proposed rule and issue a final rule by the end of this year. 

In May 2016, President Obama's Department of Labor announced a final rule that would have more than doubled the salary threshold under which employees qualified for overtime pay, raising it to $47,476 annual salary ($913 per week) from $23,660 annual ($455 per week).

It would have also provided for automatic increases of the salary levels every three years, beginning in 2020 to an estimated $51,000.

Twenty-one states and 34 trade associations challenged the rule in federal court, and in September 2017 the U.S. District Court for the Eastern District of Texas granted a permanent injunction blocking the rule. 

The DOL has the authority to impose minimum salary levels for exemption, the court decided, but the agency "exceeded its authority and [went] too far with the Final Rule" by increasing the minimum salary too much.

You would think that a Republican president would be in no rush to defend a Democratic predecessor's onerous rule burdening business. After all, the Trump administration has worked hard to overturn Obama-era regulations such as the Environmental Protection Agency's Clean Power Plan.

Yet in this case, the Trump administration appealed the order blocking the rule to the Fifth Circuit Court of Appeal. The DOL agreed to stay the appeal pending further regulation. That was 16 months ago. 

The Trump administration's delay in issuing new regulations has put employers at risk of a reversal of the injunction and retroactive application of the $48,000 salary level with little advance notice.

Even more alarming, Labor Secretary Alex Acosta has publicly indicated support for multiple different salary levels and automatic increases without further notice-and-comment rulemaking, both uniformly opposed by business associations. 

During listening sessions that DOL conducted last year, business representatives acknowledged the need for a modest salary increase but emphasized the high cost of complying with the extreme 2016 rule. They also pointed out that because employees reclassified as non-exempt lose workplace flexibility, many view the change as a demotion.

Finally, they are understandably concerned that a process for automatic increases simply locks them out of future decision-making and is unlikely to reflect the reality of changing economic conditions. 

As the U.S. Chamber of Commerce wrote to in comments to the DOL in September, "An automatic annual increase mechanism to the salary levels is tremendously problematic as it would ensure the regulated community would never again be allowed to participate in a public debate regarding the salary levels." 

The administration should stop trying to protect bad policy leftover from the previous administration and instead expedite the process of rolling out the new rule. The DOL should propose a return to the methodology that President George W. Bush's DOL developed in 2004. (Full disclosure: I served in the Department of Labor at the time and helped draft those rules.)

That means requiring payment of overtime to any employees earning around $33,000 to $35,000 annually - rather than $48,000 - without automatic increases.

This isn't about giving big businesses everything they want; it's about finding a compromise solution for a problem that's been plaguing businesses and their employees for years - a solution ensuring that all parties are able to continue providing input on this issue to the DOL in the future.

If the draft regulation doesn't do this, the White House should send DOL back to the drawing board.

Tammy McCutchen served as administrator of the U.S. Department of Labor's Wage and Hour Division during the George W. Bush Administration.

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