Employers to White House: Give Us More Time on Overtime Rule

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By Ben Penn

May 16 — Big-box retailers, universities, nonprofits and employer groups took turns in recent weeks telling the administration they need more time to comply with the Labor Department's overtime rule, ahead of its anticipated release this week.

The DOL's final rule to expand workers' overtime access has been the subject of at least 63 stakeholder meetings at the White House's Office of Management and Budget since late March, according to meeting logs posted by the OMB's Office of Information and Regulatory Affairs.

During the OMB's review of the draft final rule (50 DLR A-1, 3/15/16), about 80 percent of the meetings were with either business or higher education representatives. Only 5 percent of the discussions were with unions and worker advocacy organizations.

The meetings, a procedural part of OIRA's review, by no means offer definitive evidence of what tweaks might be unveiled in the final rule. However, among the host of recommendations that White House and DOL officials heard, the administration appeared interested in one topic in particular.

“The issue that OMB seemed to be the most receptive to is the length of the effective date,” said Tammy McCutchen, a principal at Littler Mendelson P.C. in Washington. McCutchen, administrator of the DOL's Wage and Hour Division under President George W. Bush, attended two meetings on the rule—on behalf of the U.S. Chamber of Commerce and the International Franchise Association.

The WHD's proposed rule (RIN:1235-AA11) would boost the annual salary threshold for overtime eligibility to $50,440 from $23,660 and index it each year with inflation (125 DLR AA-1, 6/30/15). The final rule will likely revise the threshold down to about $47,000 (82 DLR A-12, 4/28/16).

Other recommended rule changes under discussion include some form of relief for social service nonprofits and for universities.

OMB Asks How Long It Takes to Comply

Solicitor of Labor M. Patricia Smith said earlier this year that upon the final rule's publication date, employers will have 60 days to start complying, the minimum period required by the Administrative Procedure Act.

However, McCutchen said OMB officials asked her detailed questions about how long it takes businesses to reclassify employees as non-exempt for time-and-a-half pay when working more than 40 hours in a week.

“We went through that with them and said this is not a 60-day process; it’s more like a six-month process,” said McCutchen. She said she doubts that the ultimate effective date would be longer than 120 days from publication, which is what the DOL provided the last time it revised the Fair Labor Standards Act's overtime exemption rules in 2004. McCutchen oversaw that rulemaking as WHD administrator.

A coalition of trade associations that oppose the regulation—known as the Partnership to Protect Workplace Opportunity—also discussed revising the 60-day window with the administration last month.

The White House officials have “definitely, across the board, heard the rallying cry that 60 would be unworkable,” Lisa Horn, spokeswoman for the PPWO, told Bloomberg BNA. “I'd like to think that they're listening to these groups” and will “give us something that would be more reasonable.”

Horn, who also handles congressional affairs at the Society for Human Resource Management, is among the lobbyists pushing Congress for legislation to block implementation of the final rule (52 DLR A-1, 3/17/16).

Higher Ed, Unions Square Off

Unions and higher education institutions offered the administration conflicting accounts of the regulation's effect on university employees, a subject that has increasingly occupied time at the White House.

And echoing the calls from corporate groups, the higher education sector's principal request has been for an implementation delay. Advocates are emphasizing an inability to afford overtime pay for postdoctoral researchers, who often work well beyond 40 hours per week and in parts of the country earn an annual salary below $47,000.

More than a dozen higher education trade associations and individual colleges and universities weighed in recently. Nine of the final 14 meetings posted on OIRA were related to higher education.

“There will be fewer postdocs and other laboratory staff involved in research because of the increased compensation costs, most of which are paid by grants,” Matt Owens, interim president of the Association of American Universities, told Bloomberg BNA.

Owens, who attended an OMB meeting with a coalition of higher education stakeholders April 19, said his sector's problems with the regulation are clearly on the administration's radar.

“I think it’s very fair to say that the concerns of our community have reached the senior-most officials who are going to make decisions on this and make a recommendation to the president,” he said.

The higher education rhetoric prompted a group of four major unions to schedule their own meeting May 10 in response. At that discussion, the unions argued that postdocs can and should be paid overtime.

The college and university trade groups have been “aggressive” and “disingenuous,” Steven Kreisberg, of the American Federation of State, County and Municipal Employees, told Bloomberg BNA. “They’ve mischaracterized the situation,” and “we felt the need to clarify,” he said.

Kreisberg, AFSCME's director of research and collective bargaining services, was joined by officials from the Service Employees International Union, the United Auto Workers and the National Education Association. They all represent postdocs or other higher education employees.

Wal-Mart CEO Talked to Obama Adviser

Other business advocates met with OMB to seek a more drastic rule modification: a gradual phase-in of the salary threshold.

For instance, Wal-Mart Stores Inc. CEO Doug McMillon had a teleconference in April with Valerie Jarrett, senior adviser to President Barack Obama.

McMillon reiterated the points the retailer made in public comments submitted on the proposal in 2015, Kory Lundberg, a Wal-Mart spokesman, told Bloomberg BNA via e-mail. Those comments called for an incremental increase of the salary threshold over five years.

The National Association of Wholesalers, the Retail Industry Leaders Association and others have joined Wal–Mart in its phase-in request (76 DLR A-10, 4/20/16).

Another leading call from employer stakeholders was for the OMB to send the draft final rule back to the DOL for further economic analysis.

When the National Restaurant Association convened a group of restaurant chain CEOs to discuss the rule with the administration May 9, they highlighted the “need for a further study on the impact of these regulations, particularly on small businesses,” Angelo Amador, the NRA's vice president of labor and workforce policy, told Bloomberg BNA.

But Amador acknowledged there is political pressure for the administration to issue a final regulation in a timely manner.

Worker Advocates Say Ignore Business Concerns

A worker advocacy coalition emphasized the benefits of overtime expansion on the middle class when they met with the OMB (65 DLR A-5, 4/5/16). They said employer predictions of negative consequences for both workers and companies are incorrect.

“My message” to the administration on the revised overtime threshold is “the higher the better, and the sooner the better,” Nick Hanauer, the co-founder of venture capital firm Second Avenue Partners, told Bloomberg BNA. He joined a dozen advocates from labor and other organizations that promote workers' rights in their April 5 discussion with the administration.

Hanauer said he's “always concerned” that the business lobby could succeed in softening the overtime regulation's language. Based on the “tons of communication” he's had with the administration about the overtime rule, Hanauer added that he has confidence that the top officials involved won't sell out workers' interests.

“There are very good, very smart people working on this,” Hanauer said, citing Labor Secretary Thomas Perez and Ben Olinsky, a special assistant to Obama for labor and workforce policy. Olinsky sat in on multiple OIRA stakeholder meetings on the regulation, according to the meeting logs.

Relief for Providers Relying on Medicaid?

There's also the chance the administration could heed concerns by carving out later effective dates or different thresholds for specific sectors, such as providers of social services that rely on Medicaid funding.

For instance, the American Network of Community Options and Resources, whose members serve individuals with disabilities, has argued that the proposed regulation would require unaffordable wage hikes for employers constrained by underfunded state Medicaid systems (56 DLR A-10, 3/23/16).

ANCOR, which met with OMB about the rule in April, is asking for a longer implementation period or temporary enforcement lenience until Medicaid reimbursement rates are raised. ANCOR has received indication that its request is under consideration.

“We know that some of the congressional offices we have reached out to have also circled back to the department and the department has basically said to them, ‘We hear it, we get it, the concerns may be valid,' which is encouraging,” Gabrielle Sedor, ANCOR's chief operations officer, told Bloomberg BNA.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information

A full list of OMB stakeholder meetings is available at http://www.reginfo.gov/public/do/eom12866SearchResults?viewall=y&view=yes.