Punching In: Business Group Eyes Another Overtime Challenge

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By Chris Opfer and Jaclyn Diaz

Monday morning musings for workplace watchers

Salary No-No?| PAID Part 2| Don’t Count on an OT Carve Out

Chris Opfer: When the Labor Department eventually rolls out new private sector overtime pay requirements, it’s widely assumed we’ll see a more business-friendly rule than the Obama administration proposed. Some of the fiercest critics of the Obama version—Republicans and business groups—have largely said they’re OK with a “modest” or “reasonable” hike in the $23,500 salary level under which workers are automatically eligible for overtime pay. They just don’t want the Trump DOL to go anywhere near the $47,500 point that Team Obama liked.

But at least one influential corporate advocate thinks DOL shouldn’t touch the salary figure at all. In fact, the National Federation of Independent Business isn’t so sure the department even has the power to take pay rates into account in deciding who’s eligible for overtime pay. The group is urging the DOL to get the Justice Department to weigh on on that before moving ahead with the new rule.

“I’m not convinced they have the statutory authority to do this,” Karen Harned, who runs NFIB’s Small Business Legal Center, told me last week. “When you go and look at the statute, it really isn’t there.”

The Fair Labor Standards Act gives the labor secretary the power to determine which workers should be exempt from overtime pay requirements because they’re employed in “a bona fide executive, administrative, or professional capacity.” It doesn’t say anything specifically about using salary levels to make that determination. When federal judge Amos Mazzant first blocked the Obama rule, he seemed to question the use of salaries at all. Mazzant later tried to clarify his position, but the decision left even Labor Secretary Alex Acosta uncertain about the salary threshold question.

Will the NFIB sue if the Labor Department tinkers with the salary level? Harned said it’s too early to say. The group isn’t likely to have much support from the rest of the business community if the level stays in the low $30K range. On the other hand, NFIB’s argument could be part of a broader legal challenge if the department also includes automatic threshold updates to track inflation every few years.

I’ll have more this week on the overtime debate and a pair of companies that stuck with payroll changes they made in advance of the Obama rule even after the regulation was put out to pasture.

In the meantime, Bloomberg Law’s Hassan Kanu chats with Proskauer attorney Keisha-Ann Gray about sexual harassment investigations in the #MeToo era in this week’s Punching In podcast. Terminal readers can find it here: {NSN PGAPUL6JTSE8 }

Jaclyn Diaz: On Friday I reported on the six-month extension of the DOL’s Payroll Audit Independent Determination program, AKA PAID. So far PAID has netted “a couple hundred thousand dollars” for “a couple hundred workers” in its short lifetime—a drop in the bucket.

The DOL should improve communication with state officials during PAID’s next phase, sources I spoke to said. That could alleviate attorneys and employers’ fears about the risk of state level litigation for wage and hour violations for businesses that self-report them to the federal government.

Those fears are particularly warranted in New York and other states that haven’t exactly embraced the program.

A month after the department unveiled PAID, former New York Attorney General Eric Schneiderman drafted a letter, signed by 10 other state attorneys general, criticizing the program. That same month, his office filed a Freedom of Information Act request asking for more details on how the DOL developed the program and the department’s plans to implement it. The DOL allegedly hasn’t been too responsive and New York doesn’t like to be ignored.

On Aug. 8, the New York attorney general’s office sued the Labor Department in Manhattan federal court. State lawyers say in the complaint that the Labor Department “violated FOIA by failing to respond” within the prescribed time limit and is “unlawfully” withholding the information. The department has a different view. The two parties are currently scheduled to meet in court Nov. 2.

I’ll be keeping an eye on PAID and how this lawsuit pans out. I still have plenty of questions I’m working on getting answered, and so, apparently, does New York.

CO: One more thought on overtime.

It’s safe to expect that nonprofits and universities will yet again be made the poster children for employers that say they would be crushed by big hikes in the salary threshold. The argument is that they simply can’t afford to either give managers raises so that those workers remain exempt from overtime requirements or pay them time and a half for all hours after 40 a week. You might think then that advocates for these industries would be pushing for some sort of carve out, like a lower threshold for nonprofits and educational institutions.

Here’s why DOL isn’t likely to bite: By limiting the requirements for nonprofits and schools, the department would be acknowledging that the new rule is going to be tough for many employers. That includes small businesses, which would almost certainly respond by saying “What about us?”

That’s not to mention nonprofit and education workers, who may very well consider their own legal challenge if they feel they’re getting the short end of the stick on overtime. They’d likely have a lawsuit arguing that the move to cut them out of overtime requirements for other workers is “arbitrary and capricious,” in violation of the Administrative Procedure Act. Just like the FLSA doesn’t mention salary levels, it also doesn’t mention varying requirements based on industry.

If my friends out in the desert were taking wagers on where the DOL comes down on overtime, I’d put my money on a $35,000 salary threshold with no automatic updates, no carve outs for nonprofits, and no regional cost-of-living differences. I also wouldn’t hold my breath on a January delivery, although the department is publicly saying that’s still the target.

JD: Before I punch out, I should mention another personnel change at the DOL. Susan Harthill’s last official day as deputy solicitor for national operations at the DOL will be this Friday.

Harthill served in the solicitor’s office since 2014. She was responsible for overseeing work done in the national office by attorneys in nine program divisions.

It’s unclear where she’s headed next. (Susan, email addresses below if you’d like to tell us.) It’s equally unclear who will take over. It’s a career position so be on the lookout for an online job posting in the near future, a DOL spokeswoman said.

Harthill’s departure follows a move we mentioned last week. Molly Conway, Acosta’s deputy chief of staff, became the acting assistant secretary for the Employment and Training Administration.

We’re punching out. Daily Labor Report subscribers can check in during the week for updates. In the meantime, feel free to reach out to us: copfer@bloomberglaw.com and jdiaz@bloomberglaw.com or on Twitter: @ChrisOpfer and @JaclynmDiaz.

See you back here next Monday.

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