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S. HRG. 114–676 

AN EXAMINATION OF THE ADMINISTRATION’S 

OVERTIME RULE AND THE RISING COSTS 

OF DOING BUSINESS 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MAY 11, 2016 

Printed for the Committee on Small Business and Entrepreneurship 

( 

Available via the World Wide Web: http://www.fdsys.gov 

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(II) 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED FOURTEENTH CONGRESS 

DAVID VITTER, Louisiana, Chairman 

JEANNE SHAHEEN, New Hampshire, Ranking Member 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

TIM SCOTT, South Carolina 

DEB FISCHER, Nebraska 

CORY GARDNER, Colorado 

JONI ERNST, Iowa 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

MARIA CANTWELL, Washington 

BENJAMIN L. CARDIN, Maryland 

HEIDI HEITKAMP, North Dakota 

EDWARD J. MARKEY, Massachusetts 

CORY A. BOOKER, New Jersey 

CHRISTOPHER A. COONS, Delaware 

MAZIE K. HIRONO, Hawaii 

GARY C. PETERS, Michigan 

MEREDITH WEST, Republican Staff Director 

ROBERT DIZNOFF, Democratic Staff Director 

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C O N T E N T S 

OPENING STATEMENTS

Page 

Vitter, Hon. David, Chairman, and a U.S. Senator from Louisiana ................... 1 

WITNESSES

McCutchen, Tammy, Principal, Littler Mendelson, P.C., Washington, DC ........ 3 

Gupta, Sarita, Executive Director, Jobs With Justice, Washington, DC ............ 216 

Mantilla, Octavio, Co-Owner, Besh Restaurant Group, New Orleans, LA ......... 222 

Eisenbrey, Ross, Vice President, Economic Policy Institute, Washington, DC .. 232 

Duncan, Nancy, Associate Vice President of Human Resources, Operation 

Smile, Virginia Beach, VA ................................................................................... 243 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

American Bankers Association 

Letter to Chairman Vitter and Ranking Member Shaheen Dated May 

10, 2016 .......................................................................................................... 262 

Credit Union National Association 

Letter to Chairman Vitter and Ranking Member Shaheen Dated May 11, 

2016 ....................................................................................................................... 264

Duncan, Nancy 

Testimony .......................................................................................................... 243 

Prepared statement .......................................................................................... 245 

Eisenbrey, Ross 

Testimony .......................................................................................................... 232 

Prepared statement .......................................................................................... 234 

Gupta, Sarita 

Testimony .......................................................................................................... 216 

Prepared statement .......................................................................................... 218 

Mantilla, Octavio 

Testimony .......................................................................................................... 222 

Prepared statement .......................................................................................... 224 

McCutchen, Tammy 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 6 

Partnership to Protect Workplace Opportunity 

Letter to Chairman Vitter and Ranking Member Shaheen Dated May 

11, 2016 .......................................................................................................... 273 

Support Letter Dated April 18, 2016 .............................................................. 275 

Sampling of Higher Education Impacts from the Register and Media 

Stories ............................................................................................................ 284 

Sampling of Non-profit Comments from the Federal Register ..................... 287 

Sampling of Public Sector Comments from the Federal Register ................ 296 

Sampling of Small Business Comments from the Federal Register ............. 299 

Shaheen, Hon. Jeanne 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 260 

Vitter, Hon. David 

Opening statement ........................................................................................... 1 

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AN EXAMINATION OF THE ADMINISTRATION’S 

OVERTIME RULE AND THE RISING COSTS 

OF DOING BUSINESS 

WEDNESDAY, MAY 11, 2016 

UNITED STATES SENATE, 

COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:35 a.m., in Room 

SR–428A, Russell Senate Office Building, Hon. David Vitter, Chairman of the Committee, presiding. 

Present: Senators Vitter, Rubio, Scott, Gardner, Cardin, 

Heitkamp, Markey, and Booker. 

OPENING STATEMENT OF HON. DAVID VITTER, CHAIRMAN, 

AND A U.S. SENATOR FROM LOUISIANA 

Chairman VITTER. Good morning, everybody, and thanks for joining us today for the Senate Small Business and Entrepreneurship 

Committee hearing to examine the Obama administration’s proposal to more than double the current salary threshold under the 

Fair Labor Standards Act’s overtime exemption for administrative, 

executive, and professional employees. 

We are going to hear from a diverse panel of experts and stakeholders on the impact this proposed rule would have on small businesses and organizations around the country. And I want to thank 

all of our witnesses for being here today. 

In previous hearings, this Committee has focused on the need for 

regulatory reform in light of how Federal agencies often issue new 

rules and regulations that cause extreme undue burden on small 

businesses. 

As one of the most controversial labor regulations pushed by the 

Obama administration, the ‘‘white collar’’ overtime exemption from 

the Department of Labor certainly falls in this category. Under current rules, most employees making up to $23,660 a 

year are automatically entitled to overtime pay when working more 

than 40 hours per week. The proposed rule we are discussing today 

would more than double the threshold to extend overtime requirements to anyone earning up to $50,440. Additionally, the proposal 

sets the minimum threshold at the 40th percentile of weekly earnings for full-time salaried workers—meaning the amount could increase every year going forward. 

While President Obama’s administration believes this is the correct way to increase pay for workers, it will actually have the oppoLAP51NQ082 with DISTILLER

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site effect for small businesses. It is very likely that employers will 

respond to higher overtime costs in several ways that will actually 

reduce workers’ opportunity for long-term advancement and increased pay. 

Many employees could see their hours cut or limited to less than 

40 hours per week and lose the benefits that come with a salaried 

position, such as flexible work hours and health insurance. These 

reactive changes would have severely negative effects in the workplace. 

Along with small businesses, several different types of employers 

are particularly vulnerable to the negative effects of this rule, including: nonprofits, charities, State and local governments, and colleges and universities. 

My colleague and Chair of the Senate Health, Education, Labor, 

and Pensions Committee, Lamar Alexander, found that the new 

rule would increase operating costs for at least one Tennessee college by more than $1 million annually. The increased labor costs 

would ultimately have to be passed down to students in the form 

of an $850 tuition increase or result in job cuts for the college’s employees. 

Senator Alexander joined our Committee member, Senator Tim 

Scott, to author S. 2707, the Protecting Workplace Advancement 

and Opportunity Act, which would prevent the Department of 

Labor from finalizing President Obama’s proposed rule. I strongly 

support these efforts to move forward with the bill and want to 

commend their work on this important issue. 

Along with the Small Business Administration’s Office of Advocacy and Members of Congress from the House and Senate, I have 

raised several concerns about the role and representation of small 

businesses throughout this rulemaking process. 

I strongly believe this proposal lacks adequate economic analysis, 

and I was alarmed when the Office of Advocacy submitted comments that sharply criticized the manner in which the DOL crafted 

the proposal. Their comments stated that the DOL’s initial regulatory flexibility analysis was inaccurate and severely undercounted the number of small businesses that would be affected by 

the rule. 

I hope our conversation today will also touch on the impact the 

rule will have on small nonprofit organizations. Advocacy’s comment letter referenced a roundtable discussion that was held in 

New Orleans where a small nonprofit operating Head Start programs in Louisiana stated that this proposal would result in 

$74,000 in first-year costs. 

Since 80 percent of this organization’s operating budget comes 

from Federal programs, which cannot be used to pay for management costs like labor, they may have to cut critical community 

services to reduce labor costs. This is really unacceptable, especially for rural and poor areas that rely on different services provided by nonprofits. 

After hearing from many concerned workers and business owners, I urged Secretary Perez to extend the public comment period 

to allow small business owners and employees the opportunity to 

examine the proposed rule and comment carefully. 

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Shortly after, the Office of Advocacy wrote a similar public comment letter requesting a 90-day extension of the comment period. 

Unfortunately, all of these requests were denied by Secretary 

Perez. 

I have serious concerns with President Obama’s proposed 

changes to overtime regulations which will negatively impact the 

ability of small businesses and other organizations to operate effectively. While the rule is expected to become finalized within the 

next several weeks, it is crucial that the Administration reconsider 

their one-size-fits-all approach. 

Now, let us get today’s conversation started. Again, I would like 

to thank everyone for being a part of this discussion. 

I am going to go ahead and introduce our entire first panel, and 

then each of you will have 5 minutes in the order in which you are 

introduced and, of course, can submit any additional written comments for the record. 

Ms. Tammy McCutchen serves as the principal at Littler 

Mendelson, P.C., a law firm specializing in representing employment and labor law. Ms. McCutchen also serves as vice president 

and managing director of strategic solutions for compliance HR and 

previously served as the Administrator of the Wage and Hour Division at the U.S. Department of Labor. 

Ms. Sarita Gupta serves as the executive director of Jobs With 

Justice, a union rights organization focused on workers’ civil rights. 

Mr. Octavio Mantilla is from my home State of Louisiana. He resides in New Orleans and is the co-owner of the Besh Restaurant 

Group, where he oversees the operations of more than ten restaurants across the country. In addition to his responsibilities at 

the Besh Group, he is a board member of the Louisiana Restaurant 

Association, the Louisiana Hospitality Foundation, the New Orleans Tourism and Marketing Corporation, and the John Besh Foundation. 

Mr. Ross Eisenbrey has been the vice president of the Economic 

Policy Institute in Washington, D.C., since 2003. Mr. Eisenbrey focuses on labor and employment law, along with pension and regulatory policy. 

And Ms. Nancy Duncan is the associate vice president of human 

resources for Operation Smile, a nonprofit medical service dedicated to providing cleft lip and palate repair surgeries to children 

worldwide. Ms. Duncan is based out of Virginia Beach and has 

more than two decades of HR experience. 

So, again, welcome to all of you. Thank you for being here. And 

we will start with Ms. McCutchen. 

STATEMENT OF TAMMY D. McCUTCHEN, PRINCIPAL, LITTLER 

MENDELSON, P.C. 

Ms. MCCUTCHEN. Mr. Chairman and members of the Committee, 

thank you for giving me the opportunity to speak with you today 

regarding how the Department’s changes to the overtime regulations will impact small businesses. 

Of course, of most concern to small business is the Department’s 

proposal to increase the minimum salary level for exemption by 

113 percent, from the current $23,660 to $50,440. The purpose of 

setting a minimum salary level for exemption, as the Department 

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itself has stated since 1949, is to provide a ‘‘ready method of 

screening out the obviously nonexempt employees.’’ DOL’s proposed 

50,440 level does exactly the opposite, excluding from the exemption many employees who obviously perform exempt duties, including employees found to be exempt by Department investigators and 

the Federal courts. Such a large increase is unprecedented in the 

FLSA’s 77-year history, and using any reasonable method to set 

the minimum salary level yields a much lower number: $30,000, for 

example, the salary level if the Department used its methodology 

from 2004, setting the salary level to exclude from the exemption 

the lowest 20th percentile of salaries employees working in retail 

and the South; $32,000, the salary level if the Department applied 

increases in the Employment Cost Index since 2004; $34,000, the 

salary level if the Department used its methodology from 1958, setting that salary level to exclude the lowest 10 percent of employees 

found in DOL investigations to be exempt in the lowest wage regions, the lowest wage industries, the smallest businesses, and the 

smallest cities; $35,000, the minimum salary required for exemption under the laws of New York, also, by the way, the salary level 

if the Department looked to the historical percentage of increases 

from 1938 through 2004; $42,000, the minimum salary required for 

exemption under the laws of California, also, by the way, the starting salary for Federal Government employees with master’s degrees. 

Instead of using any of these reasonable methods, the Depart- ment arrived at $50,440, a number higher than either New York 

or California, both high-cost-of-living states with very generous 

labor laws, by using instead the 40th percentile of all salaries nationwide. It is irresponsible, particularly with the recent disturbing 

economic news, to use nationwide data that fails to distinguish salaries by region, industry, size of business, or size of city. 

I am not suggesting that we adopt different salary levels for different regions or industries, which would be a compliance nightmare for employers. But I am stating that the minimum salary has 

to be set at a level that will work for high-income and low-income 

states, for high-profit/low-profit industries, for large, small, and 

nonprofit businesses in large cities and in small rural communities. 

The purpose of the salary level is to exclude obviously nonexempt 

employees. The duties tests in the regulation then come into play 

once the obviously nonexempt have been eliminated. For 77 years, 

it has been the duties test that serves as the primary method of 

distinguishing exempt from nonexempt, of identifying who is the 

executive, administrative, and professional employee. 

Let me close with four quick points. 

First, thousands of small business owners and advocates and 

even more nonprofit businesses filed comments objecting to the propose rule, including the SBA’s Office of Advocacy, the National 

Federation of Independent Businesses, and the National Association of Women Small Business Owners. 

Second, both the NFIB and the SBA Office of Advocacy concluded 

that the Department’s flexibility analysis grossly underestimates 

the cost of the rule to small business. I was personally shocked by 

the Department’s low-ball estimate of the amount of time business 

will need to spend to comply with the rule. I would never tell my 

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clients, my employer clients, to spend so little time on FLSA compliance. 

Third, the costs to small businesses will be even higher if the Department decides to automatically increase the salary levels every 

year or to make changes to the duties tests. 

Finally, increasing the salary level to $50,440 or even to the 

$47,000 that Politico recently reported will not result in giving 

America a raise. Employees are unlikely to see higher paychecks. 

The small business owners I have talked to cannot afford to give 

a salary increase or pay overtime, so they must adjust in other 

ways: demoting management employees to hourly workers, requiring them to clock in and out, closely monitoring the hours that they 

work, decreasing the flexibility to take time off for family without 

losses in pay, taking away bonuses and other employee benefits, 

and depriving employees of opportunities for advancement. The one 

thing small businesses cannot do is redistribute money they do not 

have. 

Thank you. 

[The prepared statement of Ms. McCutchen follows:] 

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Testimony of 

Tammy D. McCutchen, Esq. 

Before the 

United States Senate 

Committee on Small Business & Entrepreneurship 

Hearing on 

"An Examination of the Administration's Overtime Rule and 

the Rising Costs of Doing Business" 

May 11,2016 

Mr. Chairman and members of the Subcommittee: 

Thank you for the opportunity to speak with you today regarding the U.S. Department of 

Labor's (the "Department") proposed revisions to the "white collar" overtime exemption 

regulations at 29 CFR Part 541. 

Currently, I am a principal in the Washington D.C. office of Littler Mendelson, P.C., 

where my practice focuses on helping employers comply with the Fair Labor Standards Act 

("FLSA"), including conducting internal audits on independent contractor status, overtime 

exemptions, and other pay practices. I also represent employers during wage-hour investigations 

by the Department and have served as an expert witness in wage-hour collective and class 

actions. I also serve as VP & Managing Director, Strategic Solutions for ComplianceHR, which 

develops compliance applications that guide employers through key employment decisions 

including whether to classify employees as exempt from overtime requirements. 

Perhaps of most relevance to the topic of this hearing, I served as Administrator of the 

Department's Wage and Hour Division from 2001 to 2004. During that time, I oversaw the 

Department's 2004 revisions to the overtime regulations, the first major changes to the 

regulations in 55 years. My official biography is attached as Exhibit A. 

I am appearing today on my own behalf only. However, I assisted in drafting the U.S. 

Chamber of Commerce's comments on the Department's Notice of Proposed Rulemaking 

("NPRM") on the Part 541 regulations. I am also a member of the Small Business Legal 

Advisory Board of the National Federation of Independent Business, the nation's leading small 

business advocacy association. The Chamber's comments to the Department's NPRM are 

attached as Exhibit 8, and the NFIB's comments are attached as Exhibit C. 

Mr. Chairman, I request that the entirety of my written testimony and its attachments be 

entered into the record of this hearing. 
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I. INTRODUCTION 

When Congress passed the FLSA in 1938, establishing the minimum wage and overtime 

requirements, it excluded executive, administrative, professional and outside sales employees 

from those protections. Congress believed then that in exchange for not being eligible for 

overtime, such employees earned salaries well above the minimum wage, were provided aboveaverage benefits and had better opportunities for advancement, setting them apart from the 

nonexempt workers entitled to overtime pay. This is still true today. 

Exempt white collar employees also enjoy more generous paid leave benefits. They earn 

bonuses, commissions, profit-sharing, stock options and other incentive pay at greater rates than 

non-exempt employees. Moving from a non-exempt position to an exempt position is the first 

rung on the promotional ladder. 

Perhaps most important, exempt employees enjoy the stability and certainty of a 

guaranteed salary. Exempt white collar employees must be paid on a salary basis - that is, they 

must receive a "predetermined" salary that "is not subject to reduction because of variations in 

the quality or quantity of the work performed." 1 Thus, while exempt employees do not receive 

overtime for working over 40 hours in a week, they also are not paid less if they work less than 

40 hours in a week. If an exempt employee works as little as one hour in the week, and then 

takes the rest of the week off because of a family emergency, that employee will still be paid her 

entire weekly salary. A non-exempt employee need be paid only for the one hour she actually 

worked. A non-exempt employee who takes an afternoon off to attend a parent-teacher 

conference will not be paid for that time, but an exempt employee will be paid her full 

guaranteed salary. 2 

This difference provides a level of workplace flexibility that distinguishes exempt from 

non-exempt employees. Secretary Perez has often discussed the importance of such flexibility in 

his own professional life: 

Involvement in my kids' sports teams is something I have made time for over the 

years. I've also been able to coach all three of them in baseball and basketball, 

something that has strengthened our bonds and given me indescribable joy. I 

wouldn't trade it for anything. I lost my own father when I was 12, and I am the 

same age today that he was when he died suddenly of a heart attack. So when it 

comes to family time, I have a strong sense of the fierce urgency of now. 

But I'm lucky. I've had jobs that allow me the flexibility to achieve work-life 

balance, to be there when one of the kids sinks a jump shot or for the parentteacher meetings. 3 

1 29 C.F.R. § 541.602(a). 2 Subject to employer paid leave policies. 3 See, e.g., Secretary of Labor Thomas E. Perez, The Most Important Family Value, Huffington Post (May 27, 2014), 

available at http:/ /www.huffingtonpost.com/thomas-e-perez/the-most-important-family _ b _ 5397442 .html. 

2 
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The Department's proposal to increase the minimum salary level for exemption to the 40th 

percentile of all "non-hourly" workers - $50,440, an increase of 113% - will eliminate the 

workplace flexibility that Secretary Perez so values for millions of employees who currently 

perforrn exempt executive, administrative, professional, computer, and outside sales job duties. 

These millions will be reclassified to non-exempt status and will be required to start punching a 

time clock. They will be paid only for hours they actually work, but that is no guarantee of 

overtime pay- as many employers will limit their work hours to fewer than 40 in a week. Being 

eligible for overtime is not the same as earning overtime, even if the employee may currently be 

working more than 40 hours a week as an exempt employee. 

Although the Department views being reclassified as non-exempt as an advantage, in fact, as 

stated by many commenters on the proposed regulations with experience managing businesses, 

limiting an employee's work hours also limits opportunities for advancement. Exempt 

employees know this too, and will view the reclassification to non-exempt status necessitated by 

the Department's proposal as a demotion. Employee morale will suffer when their work hours 

are closely monitored; they fall out of the more generous employee benefit plans; are no longer 

eligible for incentive pay; and must carefully consider whether they can afford to leave work to 

attend a child's baseball game. 

Among those who will be most impacted by the change in the mmtmum salary level for 

exemption will be small businesses. Current salary levels for small business employees who 

clearly perforrn exempt job duties fall below the proposed $50,440 threshold. Small businesses 

cannot afford to increase salaries necessary to maintain the exemption, but also cannot afford to 

pay overtime - especially when this new regulatory burden is piled on top of Affordable Care 

Act obligations, state minimum wage increases, and state paid leave requirements. The options 

for small businesses are few- cut employees, cut work hours- as they do not have excess profits 

to cover the increased costs. 

II. A BRIEF REGULATORY HISTORY 

The Fair Labor Standards Act requires covered employers to pay employees at least the 

minimum wage for all hours worked and overtime at one and one-half times the employee's 

regular rate of pay for hours worked over 40 in a workweek. However, the FLSA also contains 

about 50 separate partial or complete exemptions from the minimum wage and/or overtime 

requirements. The hearing today focuses on the exemptions for executive, administrative, 

professional and outside sales employees, codified at 29 U.S.C. § 213(a)(l). 

These exemptions, sometimes called the "white collar" exemptions, were included in the 

FLSA when the Act was passed by Congress in 1938. The FLSA itself includes no definitions of 

the terrns executive, administrative, professional or outside sales. Rather, the Act provides that 

these terrns are to be "defined and delimited from time to time by regulations of the Secretary." 

The Secretary of Labor first issued such regulations to define the white collar exemptions 

on October 20, 1938, at 29 C.F.R. Part 541. The original regulations, only two columns in the 

Federal Register, set a minimum salary level for exemption at $30 per week and established the 

job duties employees must perforrn to qualify for the exemptions. 

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The duties tests were significantly revised in 1949, including the addition of "special 

proviso[s] for high salaried" executive, administrative and professional employees- known as 

the "short tests." Except for revisions adopted in 1992 at the direction of Congress to allow 

certain computer employees to qualify for exempt status, 4 the duties tests in the Part 541 

regulations remained virtually unchanged for 55 years, from 1949 until the Department 

significantly revised the regulations in 2004. 

From 1940 to 1975, the Department raised the minimum salary level for exempt status 

every 5 to 10 years. The 1975 salary levels set forth below remained in effect until2004: 

$155 per week for executive! administrative 

• $170 for professionals 

• $250 for the short test 

In 2004, the Department eliminated the "long" and "short" test, instead adopting one 

standard test with a minimum salary of $455 and a test for highly compensated employees with 

total annual compensation of at least $100,000. 

In its Notice of Proposed Rulemaking, published in the Federal Register on July 6, 2015, 

the Department proposed to increase the minimum salary level for exempt status. The 

Department has also requested comments on possible changes to the duties tests. 

Ill. MINIMUM SALARY LEVEL FOR EXEMPTION 

The Department proposes to set the minimum salary required for exemption from the 

FLSA overtime requirements at the 40th percentile for all non-hourly paid employees, using data 

from the Bureau of Labor Statistics (BLS). 5 When the NPRM was published in July 2015, this 

methodology resulted in a minimum salary level of $921 per week or $47,892 annually. When a 

final rule is published in 2016, the Department expects that the minimum salary level based on 

the 40th percentile will increase to $970 per week or $50,440 annually - an increase of 113% 

over the current minimum salary level for exemption. 

The Department's methodology and the amount of the increase are unprecedented in the 

FLSA 's 77-year history. In my opinion, the Department cannot justify increasing the minimum 

salary level for exemption above $35,000. 

4 In 1992, at the direction of Congress, the Department revised the duties tests to allow computer employees to 

qualifY as exempt professionals. In 1996, Congress enacted a separate exemption for some computer employees in 

29 U.S.C. § 213(a)(17), incorporating some, but not all, of the Department's regulations in the Act itself. Unlike the 

Section 13(a)(l) exemptions, however, Congress did not give the Department the authority to issue regulations on 

Section 13(aX17). 

' "Non-hourly-paid" employees include employees paid on a salary basis, but also include employees paid on a fee 

basis, by commission and any other arrangement that is not hourly pay. 

4 
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In the past, the Department has used information regarding employee salaries to set the 

minimum salary levels for exemption, but has never used a salary level even close to the 40th 

percentile. In the 1958 rulemaking, for example, the Department used data on actual salary 

levels of employees that wage and hour investigators found to be exempt during investigations 

conducted over an eight-month period. Based on this data, the Department set the minimum 

salary required for exemption at a level that would exclude the lowest lOth percentile of 

employees in the lowest wage region, the lowest wage industries, the smallest businesses and the 

smallest cities. If the 1958 methodology were applied today, the resulting minimum salary level 

would be $657 per week or $34,167 annually (NPRM at Table 12). Similarly, in 2004, using 

BLS data, the Department set the minimum salary level to exclude the lowest 20th percentile of 

employees in the lowest wage region (South) and industry (Retail). The Department doubled the 

percentile used, from I 0% to 20%, to account for changes to the duties test made in the 2004 

final rule. According to the NPRM, if the 2004 methodology were applied today, the resulting 

minimum salary level would be $577 per week or $30,004 annually (NPRM at Table 12). 

Thus, the Department's proposed methodology of setting the minimum salary level at the 

40th percentile of all non-hourly-paid employees nationwide results in a minimum salary for 

exemption that is $20,000 higher than the salary level that would result if the Department applied 

the 2004 methodology, and $15,000 higher than the salary level that would result if the 

Department applied the 1958 methodology. The Department justifies the jump from the 20% of 

lower wage regions and industries used in 2004 to its proposed 40% of all non-hourly-paid 

employees nationwide by asserting it made a "mistake" in 2004 in not accounting for changes in 

the duties tests. But, the Department did account for those changes in 2004 by increasing the 

percentile from I 0% to 20%. Further, even applying the 40th percentile, the Department has not 

explained its failure to use salary levels in the lowest wage regions, the lowest wage industries, 

the smallest businesses and the smallest cities or its inclusion of earnings data for lawyers, 

doctors and sales employees who are not subject to the Part 541 salary requirements. The 

Department's data set also includes salaries of federal workers, who generally earn wages higher 

than employees working in the private sector. 

The graphic below, from an August 2015 study by Oxford Economics (attached to the 

Chamber's comments on the NPRM), illustrates the significant disproportionate economic 

impact the Department's reliance on national salary levels will have in lower wage regions. In 

Massachusetts, for example, a minimum salary level of $50,440 will exclude the lowest 27.3% of 

salaried employees. However, in Louisiana, over 50% of salaried employees will be ineligible 

for the exemption. In Washington State, only 28.7% of salaried employees earn below $50,440, 

but in Florida, 50.3% of salaried employees are below the Department's proposed new salary 

threshold. 

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Percent of Salaried Full·time Workers Earning Below $970/week 

Figure 4. Percentile of salaried full-time state wage distribution that nationai40'h percentile wage 

($970) represents. 

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The $50,440 wage level is also unsupported by looking to historical salary level 

increases. Table I below shows the history of salary level increases in the Part 541 regulations 

and calculates the percentage of increase from the prior levels. Historically, the Department has 

increased the salary levels at a rate of between 2.78% and 5.56% per year, with a median of 

4.25%. Applying the 4.25% annual median increase for 12 years (2004 to 20 16) to the current 

salary level of $455 per week ($23,660) would result in a salary level of $687 per week ($35,727 

annually). 

The Department's proposed increase to $50,440 represents an increase of9.43% per year. 

Over the last decade, salaries did not increase on average by 9.43% annually. Employment Cost 

Index data from BLS shows that for 2004 through 2014, earnings for all wage and salary workers 

increased 27.1% cumulatively over the period a 2.7% average annual change (2.2% per year 

compound rate). For the subset of private sector workers in management, professional and 

related occupations, the cumulative earnings increase for 2004 through 2014 was 32.5%, 

equivalent to a 2.6% average yearly change. Applying these average growth rates for each of 12 

years (2004 to 20 16) to the current salary level of $455 per week ($23,660 annually) would 

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result in an updated salary level of between $590.78 per week ($30, 720.30 annually) and 

$619.13 per week ($32,194.60). 

Perhaps most telling, the Department's proposed minimum salary level of $970 per week, 

$50,440 annually, is higher than the current minimum salary levels for exemption under Alaska, 

California and New York law. Just like the minimum wage, states may set higher standards for 

exemptions from state overtime requirements. In Alaska, the minimum salary level for 

exemption is $40,560. In California, the minimum salary level is currently $41,600 annually. In 

New York, the minimum salary level is $35,100 annually. Thus, the Department's proposed 

salary level of $50,440 is: 

$8,840 higher than the salary level required for exemption in California; 

• $9,880 higher that the salary level required in Alaska, and 

$15,340 higher than the salary level required in New Yorkwhich are three of the five highest cost-of-living states in the country, and among the highest 

states for median income. 

Finally, the Department's proposed $50,440 salary level is higher even than starting 

salaries for federal employees with Master's degrees. On its web page, the federal Office of 

Personnel Management explains: 

The General Schedule has 15 grades - GS-1 (lowest) to GS-15 (highest). 

Agencies establish (classify) the grade of each job based on the level of difficulty, 

responsibility, and qualifications required. Individuals with a high school 

diploma and no additional experience typically qualify for GS-2 positions; those 

with a Bachelor's degree for GS-5 positions; and those with a Master's degree for 

GS-9 positions. 

Although some employees holding Bachelor's degrees do not perform the duties required 

for the Part 541 exemptions, federal employees with Master's degrees are unlikely to be 

classified as non-exempt. Thus, the dividing line between exempt and non-exempt federal 

employees is most likely at GS-7, the mid-point between GS-5 where some employees may 

perform exempt duties and GS-9 where most federal employees likely are exempt. As shown in 

Appendix C, the salary at GS-7, Step l, is $35,009, and federal employees with Master's degrees 

start in GS-9, Step I, at $42,823. 

M~thodolog~ I Sah1r~ Lnd 

2004 Regulations $30,004 

Employment Cost Index $32,!94 

1958 Methodology $34,167 

New York State Minimum $35,100 

Historical Percentage Salary Level Increases $35,727 

California State Minimum $41,600 

Federal Employees with Master's Degree, Starting Salary $42,823 

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Since 1949, and in the 2015 NPRM, the Department has consistently stated the purpose 

of setting a minimum salary threshold is to provide a "ready method of screening out the 

obviously nonexempt employees." After all, in Section 13(a)(l), Congress exempted white 

collar employees from both the minimum wage and overtime requirements of the FLSA. Thus, 

to implement Congress' intent, the Department should not set the minimum salary threshold at a 

level that excludes many employees who obviously meet the duties tests for exemption. Or, put 

another way, Department should not set the level so high that it expands the number of 

employees eligible for overtime beyond what Congress envisioned when it created the 

exemptions. Yet, this is exactly what the Department proposes in this rulemaking. Particularly 

in the retail, restaurant, hospitality and health care industries, for small businesses and in the 

public sector, there are many, many employees earning below $50,440 annually who have been 

found exempt under the duties tests both in Department investigations and by the federal courts. 

IV. IMPACT ON SMALL BUSINESS AND 0RGANIZA TIONS 

Small businesses and their advocates uniformly agree that the Department's proposed 

$50,440 salary level will disproportionately and negatively impact small businesses, small nonprofit organizations and small government entities. Over a thousand small business filed 

comments objecting to and opposing the Department's proposed $50,440 salary level. In 

addition, organizations representing small businesses also filed comments detailing the negative 

impact of the Department's proposal - including, for example, the Small Business Association 

Office of Advocacy, the National Federation of Independent Businesses, the National 

Association of Women Small Business Owners, the National Association of Women in Real 

Estate and the Louisiana Small Business Council. 

The NFIB and the SBA Office of Advocacy, whose comments are attached as Exhibit C 

and Exhibit D, both raised significant issues regarding the Department's regulatory flexibility 

analysis. The Department claims that small business will face $750 million in new costs during 

the first year after the regulations are finalized -- $I 86.6 million in costs associated with 

implementing the rule and $561.5 million in additional wages that will now be paid to workers. 

However, all small business commenters agree that the $186.6 million in costs to implement the 

rule is a gross underestimate. According to the Department, an affected small establishment is 

expected to spend only one hour to familiarize themselves with the final rule, one hour per each 

affected worker in adjustment costs and five minutes each week for scheduling and monitoring 

each affected worker- leading to a cost per entity of only $100 to $600. 

In reality, it will take far more than an hour or two - or even ten to comply with the 

final rule. Since leaving the Department in 2004, I have assisted dozens and dozens of 

employers to reclassify employees from exempt to non-exempt. In my experience, 

reclassifications can take six months or more to achieve and hundreds of hours spent by business 

leaders, human resources professionals and outside attorneys. 

Deciding who to reclassify is just the first step, but difficult enough. Small businesses 

will need to identify all employees earning under the new minimum salary level, and then 

analyze the cost of raising salaries versus the cost of reclassify the employees and paying 

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overtime. This analysis requires the small business to determine the number of work hours 

currently exempt employees are working a challenge as employers are not required to, and 

most employers do not, track the hours worked by exempt employees. Thus, small businesses 

will need to conduct fact-finding to determine hours worked. 

After the small entity determines which employees will receive salary increases and 

which will be reclassified, implementing the reclassification involves far more than just flipping 

a switch. First, the employer must redesign the compensation plan for the reclassified 

employees: Will the employees continue to be paid a salary or be converted to the hourly wage? 

If the employees will be converted to hourly, what will those hourly wages be? If the employees 

will continue to be paid a salary, how will the overtime be calculated - by dividing salary by 40 

hours, by dividing salary by actual hours worked or by adopting the fluctuating workweek 

method for calculating overtime? Does the preferred method of calculating overtime comply 

with the state laws? Will the employer continue to pay bonuses and commissions to reclassified 

employees or fold such incentive pay into the base pay to off-set additional costs? If the 

employer decides to continue providing incentive pay, does the employer's payroll system 

correctly calculate the additional overtime due on bonuses, commissions, prizes, awards and 

other incentive pay? Are the reclassified employees currently receiving any other employee 

benefits available only to exempt employees? Will the employer continue to provide such 

benefits? If so, do the eligibility provisions in the ERISA benefit plans need to be changed? 

Small businesses will need to conduct cost analysis and make dozens of decisions just on 

compensation alone. But, to ensure compliance with the FLSA, employers will also need to: 

Review, change and/or implement new timekeeping systems to ensure the 

reclassified employees can accurately track and record all hours worked; 

• Review, reprogram and/or implement new payroll systems to ensure that the 

system correctly calculates overtime pay, especially for reclassified employees 

who will continue to receive bonuses, commissions and other incentive pay; 

• Review, revise and or adopt new wage and hour policies - policies on 

timekeeping, overtime, meal and rest breaks, travel time, meeting and training 

time, using smart phones and lap tops outside of work hours, for example - to 

ensure compliance with both the FLSA and state laws regarding when the 

reclassified emploees must be paid for such time; 

• Develop materials to communicate the changes in compensation, timekeeping 

practices and policies to both the reclassified employees and their managers; and 

• Provide training on timekeeping and wage-hour policies to the reclassified 

employees and their managers who may never before had to know what activities 

are considered work for which the reclassified employees must track their time. 

The Department may believe that compliance with the final regulations will take only a few 

hours, but responsible small businesses risk significant liability if they do not commit substantial 

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time to compliance. Frankly, I am surprised that the Department would encourage any employer 

to spend so little time ensuring compliance with the FLSA. 

The comments filed by the SBA Office of Advocacy details the significant flaws in the 

Departments regulatory flexibility analysis, including: 

• The Department underestimate the cost of compliance; 

• The Department did not analyze the impact of the proposed rule on small nonprofits organizations or small government entities; 

• The Department analyzed the impact on small businesses only in the aggregate 

using general industry definitions (using the general 2- or 3- digit North American 

Industry Classification System) when more specific data are readily available thus 

obscuring the impact of the proposed rule on an industry-subsector basis; 

• The Department applied multiple unsupported assumptions to the Census' Survey 

of U.S. Businesses (SUSB) data to determine the number of affected businesses 

and workers; and 

• The Department failed to analyze the small business data to determine impact of 

the proposed rule on a state-by-state or regional basis. 

Because of these flaws, the SBA Office of Advocacy states, the true impact of the 

Department's proposed $50,440 salary level cannot be known. The SBA Office of Advocacy 

thus recommends that the Department publish a supplemental regulatory flexibility analysis prior 

to publication of the final rule to provide a more accurate estimate of the impact of the proposed 

salary level on small entities. I urge the Committee to adopt this recommendation. 

With a flexibility analysis correcting these flaws, the true impact on small organizations 

can only be demonstrated anecdotally, but the stories being told my owners and managers of 

small businesses, small non-profit organizations and small governmental entities. Such as the 

non-profit organization operating Head Start programs in Louisiana who will need to find an 

additional $74,000 in funding to cover first year costs to comply with the proposed regulations. 

Since 80 percent of this entity's operating budget comes from federal programs and cannot be 

used to pay for management costs like labor, this Louisiana Head Start program may have to cut 

critical community services. Small grocery stores in Kentucky who attended an SBA Office of 

Advocacy roundtable reported that their profit margins were under one percent and they could 

not pass on these extra costs to their customers leaving the only option to reduce employees or 

work hours. An owner of a small restaurant in Louisville calculated that the Department's 

proposed regulations would cost his business $50,000, or 8% of payroll. An owner of five Dairy 

Queens in and around Austin, Texas with 10 exempt managers earning $30,000 per year with 

bonuses based on success of the business will have to demote and reclassify the managers to 

non-exempt demeaning the managers by forcing them to clock in and out but also controlling 

their hours to fewer than 40 to avoid overtime costs. These stories and many others told in the 

comments to the NPRM tell the true story of the impact on small organizations fewer jobs, 

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more part-time employment, less work hours, fewer benefits all harming the very employees 

that the Department seeks to protect. 

V. AUTOMATIC ANNUAL INCREASES TO THE SALARY LEVELS 

The Department has proposed to establish a mechanism for automatically increasing the 

salary levels annually based either on the percentile (the 40th percentile for the white collar 

exemptions, the 90th percentile for highly compensated employees) methodology or inflation 

(CPI-U). 

Such annual automatic increases also would be unprecedented in the 77-year history of 

the FLSA. There is no evidence that Congress intended that the salary level test for exemption 

under section 13(a)(l) be indexed. In the 77-year history of the FLSA, Congress has never 

provided for automatic increases of the minimum wage, although state minimum wages are 

sometimes indexed. Nor has Congress indexed the minimum hourly wage for exempt computer 

employees under section 13(a)(l7) of the Act, the tip credit wage under section 3(m), or any of 

the subminimum wages available in the Act. Although Congress has provided indexing under 

other statutes, it has never done so under the FLSA. 

The regulatory history of Part 541 provides no precedent for indexing. Public 

commenters have suggested automatic updates to the salary levels in at least two past 

rulemakings. In 1970, for example, a "union representative recommended an automatic salary 

review" based on an annual BLS survey, the National Survey of Professional, Administrative, 

Technical, and Clerical Pay.6 The Department quickly dismissed the idea as "needing further 

study," although stating that the suggestion "appear[ed] to have some merit particularly since 

past practice has indicated that approximately 7 years elapse[ d] between amendment of these 

salary requirements."7 However, the "further study" came in 2004, after 29 years had elapsed 

between salary increases. Nonetheless, in 2004, the Department rejected indexing as contrary to 

congressional intent, disproportionately impacting lower-wage geographic regions and 

industries, and because the Department intended to do its job: 

[S]ome commenters ask the Department to provide for future automatic increases 

of the salary levels tied to some inflationary measure, the minimum wage or 

prevailing wages. Other commenters suggest that the Department provide some 

mechanism for regular review or updates at a fixed interval, such as every five 

years. Commenters who made these suggestions are concerned that the 

Department will let another 29 years pass before the salary levels are again 

increased. The Department intends in the future to update the salary levels on a 

more regular basis, as it did prior to 1975, and believes that a 29-year delay is 

unlikely to reoccur. The salary levels should be adjusted when wage survey data 

and other policy concerns support such a change. Further, the Department finds 

nothing in the legislative or regulatory history that would support indexing or 

6 35 Fed. Reg. 883, 884 (Jan. 22, !970). 7 Id 

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automatic increases. Although an automatic indexing mechanism has been 

adopted under some other statutes, Congress has not adopted indexing for the Fair 

Labor Standards Act. In 1990, Congress modified the FLSA to exempt certain 

computer employees paid an hourly wage of at least 6.5 times the minimum wage, 

but this standard lasted only until the next minimum wage increase six years later. 

In 1996, Congress froze the minimum hourly wage for the computer exemption at 

$27.63 (6.5 times the 1990 minimum wage of $4.25 an hour). In addition, as 

noted above, the Department has repeatedly rejected requests to mechanically rely 

on inflationary measures when setting the salary levels in the past because of 

concerns regarding the impact on lower wage geographic regions and industries. 

This reasoning applies equally when considering automatic increases to the salary 

levels. The Department believes that adopting such approaches in this rulemaking 

is both contrary to congressional intent and inappropriate. 8 

Now, the Department seems to be admitting that it is incapable of doing its job: 

This history underscores the difficulty in maintaining an up-to-date and effective 

salary level test, despite the Department's best intentions. Competing regulatory 

priorities, overall agency workload, and the time-intensive nature of notice and 

comment rulemaking have all contributed to the Department's difficulty in 

updating the salary level test· as frequently as necessary to reflect changes in 

workers' salaries. These impediments are exacerbated because unlike most 

regulations, which can remain both unchanged and forceful for many years if not 

decades, in order for the salary level test to be effective, frequent updates are 

imperative to keep pace with changing employee salary levels. Confronted with 

this regulatory landscape, the Department believes automatic updating is the most 

viable and efficient way to ensure that the standard salary level test and the HCE 

total annual compensation requirement remain current and can serve their 

intended function of helping differentiate between white collar workers who are 

overtime-eligible and those who are not. 9 

The Department also states that automatic annual increases to the salary level will 

"promote government efficiency by removing the need to continually revisit this issue through 

resource-intensive notice and comment rulemaking." 10 

The Department seems to be missing the point of the Administrative Procedure Act 

("APA"). Congress intended rulemaking to be "resource-intensive," and section 13(a)(l)'s 

directive to the Department to define and delimit the white collar regulations "from time to time" 

seems fairly unambiguous; Congress wants the Department to "continually revisit" the Part 541 

regulations. There is no indication that Congress wanted to put these regulations on autopilot. 

8 2004 Final Rule at 22171-72. 9 20!5 NPRM at 38539. 10 !d. at 38537. 

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The Department argues that Congress' failure to provide "guidance either supporting or 

prohibiting automatic updating" indicates it has authority to do so. However, equally plausible is 

the assumption that Congress felt no need to act because: (I) the Department, in the 77 -year 

history of the FLSA, has never seriously considered indexing the salary level; (2) in 2004, the 

Department concluded that indexing would violate congressional intent; and (3) Congress' 

failure to ever index anything under the FLSA is sufficient guidance. 

The Department also now states that the 2004 final rule "did not discuss the Department's 

authority to promulgate such an approach through notice and comment rulemaking." 1 In 2004, 

the Department concluded that indexing the salary level is "contrary to congressional intent." 

Once concluding that Congress did not give the Department authority to provide automatic 

increases to the salary level, the subject was closed; the Department could not then proceed to 

adopt indexing through the regulatory process. The Department provides no explanation of why 

its views on congressional intent have changed. 

Notice and comment rulemaking has achieved the purpose of the AP A by ensuring 

vigorous public debate about the salary levels, including submission of salary information in 

public comments. The regulatory history shows that the Department has adjusted its proposals 

based on public comment. Proposed salary levels have been increased and decreased in the final 

regulations. For example, in 2004, in response to the public comments, the Department 

increased its proposed standard salary level from $425 per week to $455 per week, and the 

annual compensation for the highly compensated test from $65,000 to $100,000. The 

Department's proposal for automatic salary increases would end this public debate forever. 

Similarly, the Department's proposed methodology for determining the amount of the 

annual increase is not well thought out. Particularly troubling is the proposal to reset the salary 

level every year using a "fixed percentile" - pulling the flawed CPS data, year after year, to 

determine the 40th percentile of full-time, non-hourly paid earnings. 12 The Department seems to 

favor this approach, but has apparently missed a huge problem: An index that recalibrates the 

40th percentile each year, based on salaries of non-hourly paid employees, will be relying on an 

ever shrinking pool of such employees, causing a never-ending, upward ratcheting effect. In 

response to the final rule, employers may give a salary increase to some exempt employees 

already near $50,440. However, employers will need to reclassify millions of other employees 

to non-exempt status. Although non-exempt employees may be paid on a salary, a significant 

percentage of reclassified employees will be converted to hourly pay. Consequently, the lowest 

paid salary employees are likely to leave those ranks. As a result, the 40th percentile of 

employees remaining in the data set will correspond to a higher salary level, which will further 

reduce the number of employees who meet the salary threshold. This upward shift at the 40th 

percentile will continue year after year. The result will be that tomorrow's 40th percentile and 

its salary level will be an even poorer proxy for the actual work performed by exempt employees 

because the measure itself will drive the outcome. 

11 2015 NPRM at 38537, 12 2015 NPRM at 38540. 

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An analysis by Edgeworth Economics illustrates how quickly the minimum salary level 

for exemption will increase: "If just one quarter of the full-time nonhourly workers earning less 

than $49,400 per year ($950 per week) were re-classified as hourly workers, the pay distribution 

among the remaining nonhourly workers would shift so that the 40th percentile of the 2016 pay 

distribution would be $54,184 ($1,042 per week), about 9.6% higher than it was in 2015." 13 

This process would repeat each year as the lowest-paid nonhourly workers fail the salary test and 

are re-classified as non-exempt hourly workers. After five years, even in the absence of 

inflation, "the new 40th percentile of the nonhourly pay distribution would be $72,436 ($1,393 

per week), which is about 46.6% more than the minimum salary threshold in 2015." 14 

This upward ratcheting "becomes more pronounced if more nonhourly workers who 

failed the salary test are re-classified into hourly positions each year." 15 For example, if half of 

the reclassified employees are paid hourly, the 40th percentile "will increase by 19.9% in the 

first year and by 94% over a five year period. This means that a salary threshold of $49,400 

($950 per week) in 2015 would increase to $95,836 ($1,843 per week) by 2020, even in the 

absence ofinflaiion." 16 

In addition to the rulemaking and precedential issues, adopting the consumer price index 

as the measure for increasing the salary threshold would also be problematic as prices and 

salaries are related only in the long run. Year-to-year there have been wide differences in their 

rates of increase and shifts in job duties are more closely correlated with wages than prices. 

The Department also fails to consider the impact of automatic increases during a future 

economic downturn. Employers will be denied the option of lowering salaries to quickly 

respond to decreased revenue experienced in bad economic times. Both of the proposed 

methodologies for setting the new salary levels will be slow to reflect actual economic 

conditions. Implementing automatic increases in the salary threshold, by whichever 

methodology, will guarantee increases at precisely the wrong times for employers and 

employees. If the Department wishes to cement a legacy of negatively impacting future 

employers, there could hardly be a better way. 

VI. DUTIES TESTS 

In addition to earning the minimum salary level paid on a salary basis, an employee does 

not qualify for an exemption unless he or she also meets one of the duties tests for exemption. 

The Part 541 regulations establish different duties tests for executive, administrative, learned 

professional, creative professional, computer and outside sales employees. Many employees 

13 "Indexing the White Collar Salary Test: A Look at the DOL's Proposal, "Edgeworth Economics (Aug. 27, 20 15), 

available at http://www.edgewortheconomics.com/experience-and-news/edgewords-b1ogs/edgewords-businessana1ytics-and-regulation/artic1e:08-27 -20 15-12-00am -indexi ng-the-white-collar-sa1ary-test-a-look-at-the-do I-sproposal/. 

14 1d 15 1d 

"Id 

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earn above the minimum salary level, but cannot be classified as exempt because they do not 

supervise employees, are not involved with managing the business or do not hold professional 

degrees- engineering technicians, who often earn $80,000 or even $100,000 annually depending 

on the industry, are a good example. 

There is much confusion and concern in the business community regarding what changes 

the Department intends to make to the duties tests. In the NPRM, the Department stated that it 

"is not proposing specific regulatory changes at this time" and that the agency "seeks to 

determine whether, in light of our salary level proposal, changes to the duties test are also 

warranted." 

Instead, the Department raises "issues" for discussion, thus indicating that the agency is 

considering some very significant and unprecedented changes: 

• What, if any changes, should be made to the duties test? 

Should employees be required to spend a minimum amount of time performing work that 

is their primary duty in order to qualify for the exemption? If so, what should that 

minimum be? 

• Does the single standard duties test for each exemption category appropriately distinguish 

between exempt and non-exempt employees? Or, should the Department reconsider our 

decisions to eliminate the long/short duties test structure? 

Is the concurrent duties regulation for executive employees (allowing the performance of 

both exempt and non-exempt duties concurrently) working appropriately or does it need 

to be modified to avoid sweeping non-exempt employees into the exemption? 

Alternatively, should there be a limitation on the amount of non-exempt work? To what 

extent are lower-level executive employees performing non-exempt work? 

The Department also is requesting comments regarding what additional occupational 

titles or categories, as well as duties, should be included as examples in the regulations, 

especially in the computer industry. 

The NPRM contains no proposed changes to the regulatory text describing the duties that 

employees must perform to qualify for exemption. However, the Department's failure to propose 

specific changes to the regulatory text does not mean that the Department will not make any 

changes to the duties test in the final regulations. Traditionally, under the Administrative 

Procedures Act, the Department would be effectively precluded from making changes because it 

will not have given the public notice and the opportunity to comment. But, the Department has 

not foreclosed that possibility. To the contrary, in an email responding to a question from the 

publication Law360, the Department stated, "while no specific changes are proposed for the 

duties tests, the NPRM contains a detailed discussion of concerns with the current duties tests 

and seeks comments on specific questions regarding possible changes. The Administrative 

Procedure Act does not require agencies to include proposed regulatory text and permits a 

discussion of issues instead." 

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The Department's failure to provide specific regulatory text for any of these "issues" is 

perhaps the most alarming aspect of the NPRM. Perhaps the Department plans to rely on the 

"logical outgrowth" doctrine that allows regulators to issue final regulations that are a "logical 

outgrowth" of the proposed regulations. But "outgrowth" implies something to grow out of. 

Words matter. Specific word choices, and even the placement of a comma, can make a 

significant difference in how a regulation is interpreted and applied by the Department itself and 

by federal courts. Yet, apparently, the Department is signaling that it plans to make changes to 

the specific text of the regulations, especially if the business community objects to the high 

$50,440 salary level, without giving the public any chance to review and comment on that 

language. Even if the Department has a colorable argument that it need not propose specific 

regulatory text, making significant changes to the Part 541 regulations without first doing so flies 

in the face of Congress' intent in passing the Administrative Procedure Act to allow the public a 

meaningful role in rulemaking, and also contradicts the Administration's promise to bring more 

transparency to the federal government's policy-making process. 

Small businesses will be significantly and adversely impacted if the Department adopts 

changes to the duties tests. Small businesses rarely have access to expert employment attorneys 

or human resources personnel to guide them in complying with wage and hour laws. Changing 

the duties tests without providing a sufficient opportunity to comment on the specific changes, 

and imposing a short effective date, will make it difficult, if not impossible, for small business to 

comply with the final regulations. This is especially true if the Department's final rule moves 

toward the California over-50% quantitative rule for determining primary duty, eliminates the 

concurrent duties test for executives, or returns to the "long test" - a test effectively inoperable 

since the early I 980s. 

This concludes my statement. I would be pleased to respond to any questions. 

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Exhibit A 
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Employment & Labor law Solutions Worldw!dl!""' 

Tammy D. McCutchen 

Principal 

815 Connecticut Avenue, NW 

Suite 400 

Washington, DC 20006 

main: {202) 842-3400 

direct: {202) 414-6857 

fax: {202) 842-0011 

tmccutchen@littler.com 

Focus Areas 

Wage and Hour 

Legislative and Regulatory Practice 

Staffing and Contingent Workers 

Government Contractors 

Construction 

Workplace Policy Institute 

Overview 

A former administrator of the wage and hour division at the U.S. Department of Labor, Tammy D. McCutchen is a leading 

authority on federal and state wage and hour laws who now represents and counsels management clients in connection 

with all types of labor and employment matters. She focuses her practice on: 

Compliance with the Fair Labor Standards Act and state wage-hour laws 

Conducting audits of overtime exemption classifications, non-exempt pay practices and independent contractor 

status 

Implementing compliance programs designed to avoid wage and hour disputes and lower potential litigation 

liabilities 

Representing employers being investigated by the DOL's Wage and Hour Division and similar state agencies 

She also regularly serves as a consulting or testifying expert witness in wage-hour collective and class actions. 

Additionally, Tammy represents and counsels clients on: 

The Family and Medical leave Act 

The Service Contract Act 

The Davis Bacon Act 
25 

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Tammy D. McCutchen 

The Migrant and Seasonal Worker Protection Act 

Worker protections in federal immigration laws 

Reasonable accommodation under the Americans with Disabilities Act 

Federal and state discrimination laws 

Affirmative action and prevailing wage requirements for government contractors 

She appears before state and federal courts, the Equal Employment Opportunity Commission, the DOL, and state 

agencies. 

A frequent speaker .. Tammy has lectured about wage and hour issues before trade associations, business organizations, 

and human resource groups. Most frequently, she works with clients in the following industries: 

Retail 

Restaurant 

Hospitality 

Janitorial 

Security 

Manufacturing 

Insurance 

Accounting 

Health care 

Tammy is co~chair of Littler Mendelson's Compliance Audit Services Practice Group and a core member ofthe Wage and 

Hour Practice Group. She also is the primary architect of the firm's AuditQB software tool for conducting employment 

compliance audits. 

While at the DOL from 2001 to 2004, Tammy was responsible for enforcing, setting policy and preparing regulations for 

some of the country*s most comprehensive labor laws, including: 

The Fair Labor Standards Act 

The Family and Medical Leave Act 

The Davis-Bacon Act 

The McNamara-O'Hara Service Contract Act 

The Medicare Secondary Payer Act 

She managed the annual budget and 1,400 employees, represented by two unions, in more than 250 offices across the 

country. She was a primary architect of the first major changes to DOL overtime regulations in SO years and, under her 

leadership, the DOL increased enforcement by 60% in two years, while collecting millions of dollars in back wages. 

Before working at the DOL, Tammy was senior counsel at a global chocolate corporation, where she provided counseling 

on labor and employment matters involving employees at corporate headquarters, field sales offices, and manufacturing 

plants located in the United States, Canada and Mexico. She was responsible for: 
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Tammy D. McCutchen 

Managing employment litigation 

Advising the company on collective bargaining and labor arbitration issues 

Managing the preparation and implementation of affirmative action plans 

Providing assistance to the Diversity Council 

Conducting training for managers on recognizing and responding to discriminatory harassment 

Tammy also clerked for Judge Daniel A. Manion on the United States Court of Appeals for the Seventh Circuit and 

practiced law in Chicago for eight years. 

Professional and Community Affiliations 

Member, Labor and Employment Law Section, American Bar Association 

Member, Editorial Advisory Board-, Law360, 2013 

Chair, Labor and Employment Practice Group, Federalist Society 

Member, Small Business Legal Advisory Board, National Federation of Independent Business 

Recognition 

Named, America's Leading Lawyers for Business, Chambers USA, 2012-2015 

Order of the Coif 

Education 

J.D., Northwestern University School of Law, 1990, cum laude 

B.A., Western Illinois University, 1987, summa cum laude 

Bar Admissions 

District of Columbia 

Illinois 

Publications & Press 

Uttler Offers Compliance Guidance as Overtime Rule Changes Loom 

Legaltech News 

April21, 2016 

New Overtime Rules May Take Effect in Mid-July, McCutchen Says 

Bloomberg BNA Daily Labar Repart 

April14, 2016 
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Tammy D. McCutchen 

Overtime Rule Changes Not Final, But Employers Rushing to Comply 

Bloomberg BNA 

Apri113, 2016 

Littler Launches Compliance Solution for New Overtime Rules 

Littler Press Release 

Aprill2, 2016 

Obama's HR Legacy 

Human Resource Executive 

March 24, 2016 

Republicans Launch Preemptive Attack on Overtime Rule 

Bloomberg BNA 

March 17, 2016 

Overtime Rules Pose Massive Challenges for Employers 

Employee Benefits News 

March 16, 2016 

Overtime Rule Advances Toward Publication 

SHRMOnline 

March 15, 2016 

A November Overtime Surprise from the DOL? 

Bloomberg BNA 

March 14, 2016 

Law360 Employment Editorial Advisory Board 

Law360 

February 26, 2016 

WHO Stats Tell Mixed Story on Enforcement Success 

Bloomberg BNA 

January 26, 2016 

New DOL Guidance Has Chilling Effect on Third-Party Relationships 

Compliance Week 

January 26, 2016 

Uttler 

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Joint Employment Has 'Broad as Possible' Meaning, DOL Says 

Bloomberg BNA 

January 22, 2016 

Morning Shift: Business Challenge to Joint Employer Guidance? 

Politico 

January 21, 2016 

DOL Issues Guidance on Joint Employment under FLSA 

Littler ASAP 

January 20, 2016 

Businesses On Notice After DOL Joint Employer Guidance 

Law360 

January 20, 2016 

labor Department to Suggest Designating More Businesses 'Joint Employers' 

Wall Street Journal 

January 20, 2016 

Employment legislation and Regulation To Watch In 2016 

Law360 

December 24, 2015 

Ex WHO Chief: Employers Must Prepare for DOL Independent Contractor Approach 

Bloomberg BNA Doily Labor Report 

October 30, 2015 

Guest Column: Anticipating Changes to Overtime Regs 

Portland Business Journal 

October 2, 2015 

5th Circuit Rebuke Could Give Employers An Edge in DOL Fights 

Low360 

September 23, 2015 

FLSA Guru Tammy McCutchen Discusses How to Get Ready for New Overtime Regulations 

XpertHR Blog 

August 11, 2015 
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Meet the overtime elite 

Politico 

August 4, 2015 

House Panel Considers Effects of Overtime Prop.osal 

Bloomberg BNA 

July 23, 2015 

Where the human resource worries reside 

Fleet Owner 

July 17, 2015 

Opinion: Hillary, Obama meddle in the workplace again 

MorketWotch 

July 16, 2015 

When an independent contractor is really an employee 

CNNMoney 

July 16, 2015 

Clinton says she'd 'crack down' on independent contractor abuse. Obama already has. 

The Washington Post 

July 15, 2015 

Employees vs. Independent Contractors: U.S. Weighs In on Debate Over How to Classify Workers 

The Woi/Street Journal 

July 15, 2015 

Labor Department says dependency, not control, key in classifying workers 

Reuters 

July 15, 2015 

Employers Brace for Scrutiny After Misclassilication Memo 

Low360 

July 15, 2015 

Overtime Reform, ACA, LGBT Policies Among Concerns for Today's Employers 

Littler Press Release 

July 14, 2015 

Uttler 

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FLSA guru provides insight on proposed overtime changes 

HR.BLR.com 

July 7, 2015 

DOL Publishes the Proposed Revisions to the White Collar Regulations and Sets a Deadline to Submit Comments 

Littler ASAP 

July 7, 2015 

The Top 10 Quotes from HR's Biggest Conference of the Year 

Business Management Daily 

July 1, 2015 

Final OT Rule May Go Beyond Salary Hike, Lawyers Say 

Low360 

June 30, 2015 

Obama wants to make S million more workers eligible for overtime 

CNN Money 

June 30, 2015 

Obama swings left with overtime regs 

The Hill 

June 30, 2015 

5 million more Americans could soon be eligible for overtime pay- but critics say it won't mean any more money in the 

bank 

Business Insider 

June 30, 2015 

Special Report with Brett Baier 

Fox News 

6/30/2015 

DOL Releases Proposed Revisions to "White Collar" Overtime Exemptions 

Littler ASAP 

June 30, 2015 

Overtime Proposed Rule Could Wreak Havoc 

Society For Human Resource Management 

June 29, 2015 
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Why Your Overtime Expenses Are About to Skyrocket 

Inc. 

June 29, 2015 

Why Your Overtime Expenses Are About to Skyrocket 

Inc. 

June 8, 2015 

How Employers Can Avoid The Pitfalls Of Workplace Tech 

Law360.com 

June 3, 2015 

With New OT Regs Looming, Lawyers Advise Early Planning 

Law360.com 

May 26, 2015 

Chambers USA Recognizes Littler and Its Attorneys 

Littler Press Release 

May 20,2015 

4 ways the new overtime rules may affect your paycheck 

CNN Money 

May 14, 2015 

DOL Sends Proposal to Narrow Overtime Exemptions to the White House 

Littler ASAP 

May 6, 2015 

Littler Launches New Technology Solution for Employment Law Compliance 

Littler Press Release 

May 6, 2015 

Supreme Court Sides with Labor Department In 'Rulemaking' Challenge 

Thomson Reuters Westlaw Journal 

March 31, 2015 

The Supreme Court Sides with the Department of Labor in "Rulemaking" Challenge 

Littler Insight 

March 11, 2015 
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Supreme Court 9-0 Says DOL Didn't Need Rule making to Change FLSA Interpretation 

Bloomberg BNA 

March 10, 2015 

Labor Department wins at SCOTUS 

Politico 

March 10, 2015 

Supreme Court Sides with DOL on Change to FLSA Interpretation 

Society for Human Resource Management (SHRM) 

March 10, 2015 

Supreme Court Conservatives Grudgingly Allow Labor To Change Its Mind 

Forbes 

March 9, 2015 

OVERNIGHT REGULATION: Regulators win big at high court 

The Hill 

March 9, 2015 

DOL's Use of Hot Goods Enforcement Tool Is Too Aggressive, Some Observers Contend 

Bloomberg BNA Daily Labor Report 

November 25, 2014 

FLSA Proposed Rule Delayed 

Society for Human Resource Management (SHRM) 

November 3, 2014 

Low wages, no overtime: The downside of being a retail ~manager' 

Washington Post 

September 26, 2014 

New Overtime Rules Big Deal for HR 

Society for Human Resource Management (SHRM) 

June 23, 2014 

High Court loan Officer Suit May Curb Agency Flip-Flopping 

Law360.com 

June 16, 2014 
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5 Officials Employment Attys Need To Know 

Law360.com 

May 30,2014 

Littler and Its Attorneys Ranked In 2014 Chambers USA Guide 

Littler Press Release 

May 23,2014 

Ramped-Up Enforcement Expected Under New DOL Wage Chief 

Law360.com 

April 30, 2014 

Concerns Over Overtime 

Human Resource Executive Online 

April15, 2014 

David Weil as Wage and Hour Administrator 

Society for Human Resource Management (SHRM) 

March 31, 2014 

President Obama Directs the Department of Labor to Revise Federal Overtime Regulations 

Littler Insight 

March 18, 2014 

Employers must prepare for overtime overhaul 

Corporate Secretory 

March 18, 2014 

Obama overtime plan already stirring controversy 

Associated Press 

March 14, 2014 

Tommy, overtime rule change? 

WWL-AM870 

March 14, 2014 

Obama orders overtime rule changes 

USA Today 

March 13, 2014 

10 
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Employers Should Brace Themselves For Obama's OT Push 

Law360.com 

March 13, 2014 

Obama to Direct Overtime Expansion Under Labor Law to Promote Wage Agenda 

Bloomberg BNA Daily Labor Report 

March 13, 2014 

Obama seeks middle class support by extending overtime pay 

Washington Times 

March 13, 2014 

Obama Tackles Overtime 

Human Resource Executive Online 

March 13, 2014 

What the new overtime rules mean for me 

CNBC.com 

March 13, 2014 

President Vows To Expand Overtime Pay, But Will Workers See Arly Benefit? 

Forbes 

March 12, 2014 

The President Goes to Overtime 

Wall Street Journal 

March 12, 2014 

Business groups stunned as Obama gives millions overtime 

The Hill 

March 12, 2014 

Obama1S OT Expansion Could Hit Restaurants, Retailers Hard 

Law360.com 

March 12, 2014 

Obama to seek broad update to U.S. rules for overtime pay 

Reuters 

March 12, 2014 

littler 

11 
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High Court Finds Middle Ground On 'Clothes' Under FLSA 

Law360.com 

January 29, 2014 

Supreme Court Finds Middle Ground on Definition of "Clothes" Under the FLSA 

Littler Insight 

January 28, 2014 

No Pay for Donning/Doffing Safety Gear, Supreme Court Says 

Society for Human Resource Management (SHRM) 

January 28, 2014 

Justices Say Steel Workers' Donning/Doffing Of Gear Is 'Changing Clothes' Under FLSA 

Bloomberg BNA Daily Labor Report 

January 27, 2014 

High Court Brings Clarity To 'Changing Clothes' Under FLSA 

Law360.com 

January 27, 2014 

Uncle Sam Looking Closer at Independent Contractors 

FOX Business 

November 19, 2013 

Challenges and Best Practices for Home Care Employers Following the Elimination of the Companionship Exemption 

Littler Report 

November 7, 2013 

Supreme Court Hears Oral Argument and Appears to Seek Middle Ground on Definition of "Clothes" Under the FLSA 

Littler Insight 

November 5, 2013 

Sandifer Oral Arguments Reveal New Middle Ground 

Law360.com 

November 5, 2013 

U.S. Supreme Court weighs fight over changing clothes at work 

Reuters 

November 4, 2013 

12 
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Supreme Court to Define the Word "Clothes" and Settle DOL Flip-Flopping 

Littler ASAP 

November 1, 2013 

DOL Flip-Flopping Looms Large For High Court FLSA Hearing 

Law360.com 

November 1, 2013 

Department of Labor Eliminates the Minimum Wage and Overtime Exemption for Most Home Care Aides 

Littler Insight 

September 25, 2013 

Littler Mendelson Named in the 2013 Chambers USA Guide 

Littler Press Release 

May 24,2013 

Workplace Policy Institute: The Labor, Employment and Benefits Law Implications of the Affordable Care Act- Are You 

Prepared? 

Littler Repart 

May9, 2013 

Regulators Crack Down on Classifying Workers as Contractors 

Wall Street Journal 

March 3, 2013 

Drug Rep Ruling May Give Employers More Ammo In OT Suits 

Law360.com 

June 20, 2012 

Supreme Court Reaffirms Status of Drug Sales Reps 

BioWorld 

June 19, 2012 

'Regulation By Amicus' No Longer An Option For Agencies 

Law360.com 

June 19, 2012 

Justices 5-4 Reject Labor Department View, Find Pharmaceutical Sales Reps FLSA-Exempt 

Bloomberg BNA Daily Labor Report 

June 18, 2012 

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Supreme Court's Pro~Pharma Decision On Sales Rep Overtime Reproves Informal Agency Policymaking 

The Pink Sheet 

June 18, 2012 

SCOTUS Overtime & Implications 

Washington Legal Foundation 

June 5, 2012 

Sales Reps, Overtime & The Labor Dept: Tammy Explains 

Pharmolot 

April17, 2012 

High Court Considers Drug Sales Reps' OT Status 

Law360.com 

April17, 2012 

New Jersey Issues Proposed Regulations to Restore Its Exemption for Commissioned Sales. Employees 

littler Insight 

November 21, 2011 

New Jersey Proposes Reinstating Commissioned Sales Employee Exemption 

Littler ASAP 

November 21, 2011 

New Jersey Inadvertently Eliminates Its Exemption for Commissioned Sales Employees 

littler Insight 

October 17, 2011 

NJ Inadvertently Eliminates Its Exemption for Commissioned Sales Employees 

littler ASAP 

October 14, 2011 

Chambers USA Honors Littler And Its Attorneys 

Littler Press Release 

June 27, 2011 

Tammy McCutchen Named to National Federation of Independent Business' Advisory Board 

Littler Press Release 

March 3, 2011 

littler 

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Tammy D. McCutchen Uttler 

Snow Days 

Littler ASAP 

January 13, 2011 

Leon Rodriguez to Be Nominated for the Top Job at the Wage and Hour Division 

Littler ASAP 

December 3, 2010 

Department of Labor to Provide Information and Documents from Wage-Hour Investigations to Employees and Plaintiffs' 

Attorneys 

Littler ASAP 

December 2, 2010 

leon Rodriguez to Be Nominated for the Top Job at the Wage and Hour Division 

Littler ASAP 

December 2, 2010 

littler Attorneys Honored by Chambers USA 

Littler Press Release 

June 21, 2010 

Tammy McCutchen, Former Administrator of the Wage and Hour Division and Littler Shareholder, Comments on the 

Abolishment of the Employment Standards Administration at the U.S. Department of Labor 

Littler ASAP 

July 10, 2009 

Transition To A New (Work) Day: An Initial look at Workplace Change in the Obama Era 

Littler Report 

November 25, 2008 

Total Wage and Hour Compliance: An Initiative to End the Wage and Hour Class Action War 

Littler Report 

April 21, 2008 

Tammy McCutchen Says Employers Can Dock Pay 

MSNBC.com 

June 15, 2007 

Littler Mendelson Welcomes Tammy McCutchen To Washington, D.C. Office 

Littler Press Release 

March 9, 2007 

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Tammy D. McCutchen 

Speaking Engagements 

Countdown to Overtime: Are You Ready? 

April14, 2016 

DOL's Proposed Changes to the White Collar Regulations: What Should Employers Do Now? 

Anchorage, AK 

February 17, 2016 

Working on Overtime: Preparing for DOL's Changes to the FLSA Overtime Regulations 

February 9, 2016 

Working on Overtime: Preparing for DOL's Changes to the FLSA Overtime Regulations 

January 27, 2016 

Ready or Not ... Changes to the White Collar Regulations Expected in 2016: What Should Employers Do Now? 

Pittsburgh, PA 

January 26, 2016 

Independent Contractors, Joint Employers and the Unintended Employment Relationship 

Tysons Corner, VA 

December 16, 2015 

DOL's Proposed Changes to the White Collar Regulations: What Should Employers Do Now? 

Portland, OR 

November 4, 2015 

Independent Contracting Under Attack: Navigating the Classification and Compliance Challenge 

October 30, 2015 

DOL's Proposed Changes to the White Collar Regulations: What Should Employers Do Now? 

Tysons Corner, VA 

September 23, 2015 

Proposed Changes to the Overtime Regulations 

July 1, 2015 

New Year, New Focus: Our Suggested Top HR Resolutions for 2015 (including a few targeting government contractors) 

Tysons Corner, VA 

December 16, 2014 

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Tammy D. McCutchen 

Department of labor Revises Federal Overtime Regulations 

April 2, 2014 

The Disappearing Companionship Exemption: How is the Home Health Industry Responding to its Elimination for Home 

Care Workers 

November 14, 2013 

Understanding and Responding to the U.S. DOL's Investigation Initiative Targeting the Construction Industry 

February 7, 2012 

Are You Complying with the Recent FLSA Tip Credit Regulation Changes? 

July 14, 2011 

The New DOL Regulations Take Effect May 5, 2011- Are You Ready? 

May 4, 2011 

Emerging Wage-Hour Class Action Threat Breakfast 

Columbus, OH 

Apri128, 2010 

ACC Annual Meeting 

Boston, MA 

October 19, 2009 

labor and Employment Law Priorities Under the New Administration 

Washington, DC 

December 2, 2008 

The 2008 Pennsylvania Employer 

Philadelphia, PA 

October 1, 2008 

Open House Celebration of Uttler Mendelson's New Seattle Office 

Seattle, WA 

September 19, 2008 

Compliance Solutions from the Boardroom to the Courtroom 

Tysons Corner, VA 

April 26, 2007 

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Tammy D. McCutchen Littler 

Books & Book Chapters 

"29 C.F.R. Part 541", U.S. Department of Labor, 2004 

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Exhibit B 
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CHAMBER OF COMMERCE 

OF THE 

UNITED STATES OF AMERICA 

RANDEL K. JOHNSON 

SENIOR ViCE PRESIDENT 

LABOR, l:>..iMIGRATlON & EMPLOYEE. 

BENEFITS 

1615 H N.W. 

WASHINGTON, 20062 

202/463-5522 

September 4, 2015 

VIA ELECTRONIC FILING: www.regulations.gov 

Dr. David Weil 

Administrator 

Wage and Hour Division 

U.S. Department of Labor 

200 Constitution Avenue N.W. 

Washington, DC 20210 

MARC D. FREEDMAN 

EXEC DIRECTOR, LABOR L:\W POLICY 

L1\BOR, IMMIGRATION & E:O.lPLOYEE 

AFSEl'ITS 

RE: RIN 1235-AAll, Proposed Rule, Defining and Delimiting the 

Exemptions for Executive, Administrative, Professional, Outside 

Sales and Computer Employees, 80 FR 38516 (July 6, 2015) 

Dear Dr. Weil: 

The United States Chamber of Commerce (the "Chamber") submits these 

comments in response to the proposal of the Department of Labor (the "Department"), as 

published in the Federal Register, 80 FR 38516, on July 6, 2015, to revise the regulations 

at 29 C.F .R. Part 541, defining and delimiting the exemptions for executive, 

administrative, professional, outside sales and computer employees in section 13(a)(l) of 

the Fair Labor Standards Act ("FLSA" or the "Act"), 29 U.S.C. § 213(a)(l). 
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United States Chamber of Commerce 

Comments on RIN 1235-AAII 

TABLE OF CONTENTS 

STATEMENT OF INTEREST ........................................................................................... I 

INTRODUCTION .............................................................................................................. 2 

DISCUSSION ..................................................................................................................... 5 

I. THE DEPARTMENT'S PROPOSAL TO SET THE MINIMUM 

SALARY LEVEL USING THE 40TH PERCENTILE OF WAGES 

EARNED BY NON-HOURLY EMPLOYEES, WILL EXCLUDE 

MILLIONS OF EMPLOYEES WHO MEET THE DUTIES TESTS 

FOR EXEMPTION, CONTRARY TO THE INTENT OF 

CONGRESS .................................................................................................... I 0 

A. The Department Has Long Recognized That The Purpose Of 

The Salary Level Test Is To Exclude Only "Obviously" NonExempt Employees ............................................................................ I 0 

B. Setting The Minimum Salary Level At The 40th Percentile Of 

Earnings of All "Non-Hourly" Paid Employees Ignores 77 

Years Of Legislative History, Regulatory History And 

Changes To The American Economy ................................................ 12 

C. The Department's 20th Percentile Methodology In 2004 Was 

Sufficient To Account For Changes In The Duties Tests .................. I6 

D. The Department's Proposed Minimum Salary Level is Too 

High Under Any Other Methodology ................................................ 20 

E. The Department's Proposed $50,440 Salary Level Is 

Particularly Inappropriate for the Non-Profit, Government and 

Healthcare Sectors Which Cannot Increase prices to Offset 

Costs .................................................................................................. 26 

F. The Department's Proposal To Credit Non-Discretionary 

Bonuses Towards The Salary Requirement Is Nothing More 

Than A Ruse ...................................................................................... 27 

G. Without a Pro-Rata Provision, the Department's New Salary 

Level Will Interfere with Part time Professional Positions ............... 28 

H. If The Department Moves Forward With a 113 percent Increase 

to the Salary Level, the Department Should Provide a OneYear Effective Date and Phase in the Salary Increase Over 

Five Years .......................................................................................... 29 
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United States Chamber of Commerce 

Comments on RIN 1235-AAII 

II. THE DEPARTMENT SHOULD ABANDON ITS PROPOSAL TO 

INCREASE THE SALARY LEVEL FOR THE HIGHLY 

COMPENSATED TEST ................................................................................ 30 

III. THE DEPARTMENT'S PROPOSAL FOR AUTOMATIC ANNUAL 

SALARY LEVEL INCREASES IS CONTRARY TO 

CONGRESSIONAL INTENT, VIOLATES THE 

ADMINISTRATIVE PROCEDURE ACT, IGNORES 77 YEARS OF 

REGULATORY HISTORY, WILL HAVE A RATCHETING 

EFFECT, AND WOULD IMPOSE SIGNIFICANT ADDITONAL 

BURDENS ON EMPLOYERS ...................................................................... 30 

IV. THE DEPARTMENT SHOULD NOT MAKE ANY CHANGES TO 

THE DUTIES TESTS ..................................................................................... 36 

A. The Department is Precluded by the Administrative Procedure 

Act from Making Any Changes to the Duties Tests .......................... 36 

B. Definition of Primary Duty .................................................................. 39 

C. Concurrent Duties Provision Should be Maintained ........................... 42 

D. Long/Short Duties Test Structure ........................................................ 44 

E. New Job Classification Examples ....................................................... 46 

V. COMPLIANCE ASSISTANCE AND ENFORCEMENT ............................. 47 

VI. THE DEPARTMENT'S FUNDAMENTLY FLAWED ECONOMIC 

ANALYSIS GROSSLY UNDERESTIMATES THE COSTS OF 

THIS RULEMAKING .................................................................................... 48 

A. The Department's Reliance On The Current Population Survey 

As The Sole Source Of Salary Data Is Inappropriate ........................ 49 

B. Because of the weaknesses in the CPS data, the Department 

should consider other data alternatives before setting the 

salary level or, in the alternative, should correct for the 

weakness by selecting a much lower percentile ................................ 55 

C. The Non-hourly Workers' Data Used Was Specifically 

Inappropriate ...................................................................................... 56 

D. Inadequate Assessment of Compliance Costs, Transfers and 

Benefits .............................................................................................. 58 

CONCLUSION ................................................................................................................. 61 

ii 
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United States Chamber of Commerce 

Comments on RIN 1235-AAII 

STATEMENT OF INTEREST 

The United States Chamber of Commerce is the world's largest business 

federation, representing more than three million businesses and organizations of every 

size, sector, and region, with substantial membership in all 50 states. The Chamber's 

mission is to advance human progress through an economic, political, and social system 

based on individual freedom, incentive, initiative, opportunity, and responsibility. An 

important function ofthe Chamber is to represent the interests of its members in federal 

employment matters before the courts, Congress, the Executive Branch, and independent 

federal agencies. Positions on national issues are developed by a cross-section of 

Chamber members serving on committees, subcommittees, and task forces. More than 

1,900 business people participate in this process. The Chamber also represents many 

state and local chambers of commerce and other associations who, in tum, represent 

many additional businesses. 

The Department of Labor's proposed changes to the regulations at 

29 C.F.R. Part 541 (the "Part 541" or "white collar" regulations), if finalized, will have 

significant impact on our members. We write to express our concerns with the 

Department's proposal and urge its withdrawal. 
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INTRODUCTION 

United States Chamber of Commerce 

Comments on RIN I235-AA II 

When Congress passed the FLSA in 193 8, establishing the minimum wage and 

overtime requirements, they excluded executive, administrative, professional and outside 

sales emplo.yees from those protections. Congress believed then that in exchange for not 

being eligible for overtime, such employees earned salaries well above the minimum 

wage, were provided above-average benefits and had better opportunities for 

advancement, setting them apart from the nonexempt workers entitled to overtime pay. 

This is still true today. 

Exempt white collar employees also enjoy more generous paid leave benefits. 

They earn bonuses, commissions, profit-sharing, stock options and other incentive pay at 

greater rates than non-exempt employees. Moving from a non-exempt to an exempt 

position is the first rung on the promotional ladder. 

Perhaps most importantly, exempt employees enjoy the stability and certainty of a 

guaranteed salary. Exempt white collar employees must be paid on a salary basis- that 

is, they must receive a "predetermined" salary that "is not subject to reduction because of 

variations in the quality or quantity of the work performed." 1 Thus, while exempt 

employees do not receive overtime for working over 40 hours in a week, they also are not 

paid less if they work less than 40 hours in a week. If an exempt employee works as little 

as one hour in the week, and then takes the rest of the week off because of a family 

emergency, that employee will still be paid her entire weekly salary. A non-exempt 

employee need be paid only for the one hour he actually worked. A non-exempt 

employee who takes an afternoon off to attend a parent-teacher conference will not be 

paid for that time, but an exempt employee will be paid her full guaranteed salary.2 

This difference provides a level of workplace flexibility that distinguishes exempt 

from non-exempt employees. Secretary Perez has often discussed the importance of such 

flexibility in his own professional life: 

Involvement in my kids' sports teams is something I have made time for 

over the years. I've also been able to coach all three of them in baseball 

and basketball, something that has strengthened our bonds and given me 

indescribable joy. I wouldn't trade it for anything. I lost my own father 

when I was 12, and I am the same age today that he was when he died 

suddenly of a heart attack. So when it comes to family time, I have a 

strong sense of the fierce urgency of now. 

1 29 C.F.R. § 541.602(a). 

2 Subject to employer paid leave policies. 

2 
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United States Chamber of Commerce 

Comments on RIN 1235-AAII 

But I'm lucky. I've had jobs that allow me the flexibility to achieve worklife balance, to be there when one ofthe kids sinks a jump shot or for the 

parent-teacher meetings. 3 

The Department's proposal to increase the minimum salary level for exemption to 

the 40th percentile of all "non-hourly" workers - $50,440, an increase of 113 percent -

will eliminate the workplace flexibility that Secretary Perez so values for millions of 

employees who currently perform exempt executive, administrative, professional, 

computer, and outside sales job duties. These millions will be reclassified to non-exempt 

and be required to start punching a time clock. They will be paid only for hours they 

actually work, but that is no guarantee of overtime pay- as many employers will limit 

their work hours to fewer than 40 in a week. Being eligible for overtime is not the same 

as earning overtime, even if the employee may currently be working more than 40 hours 

a week as an exempt employee. 

Although the Department views being reclassified as non-exempt as an 

advantage, in fact, Chamber members with vast experience managing private sector 

businesses know that limiting an employee's work hours also limits opportunities for 

advancement. Exempt employees know this too, and will view the reclassification to 

non-exempt necessitated by the Department's proposal as a demotion. Employee morale 

will suffer as their work hours are closely monitored, they fall out of the more generous 

employee benefit plans, are no longer eligible for incentive pay, and must carefully 

consider whether they can afford to leave work to attend a child's baseball game. 

In addition, because of the Department's proposal to automatically increase the 

salary level every year, more exempt employees will be reclassified every year and lose 

flexibility, benefits and opportunities for advancement every year. 

Among the employers who will be most impacted by the change in the salary 

threshold will be those in the nonprofit and medical provider sectors. These employers 

are unable to increase their revenues to cover the increased costs of complying with the 

higher salary threshold, either because they are charitable organizations that survive on 

contributions, or their revenue is dictated by insurance rates that they have no opportunity 

to influence. 

President Obama directed the Department to "modernize" the white collar 

regulations,4 but the Department's proposal will return our workplaces back to the 1950s 

3 See, e.g., Secretary of Labor Thomas E. Perez, The Most Important Family Value, Huffington Post (May 

27, 20 14), available at http://www.huffingtonpost.com/thomas-e-perezlthe-most-importantfamily_b_5397442.html. 

4 Shortly thereafter, Secretary Perez conducted "listening sessions" with representatives of the employer 

community, including the U.S. Chamber. Unfortunately, there is no evidence that these sessions had any 

impact on the Department's proposal. 

3 
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United States Chamber of Commerce 

Comments on RIN 1235-AAII 

when all but the most highly paid employees punched a time clock and managers were 

prevented by union contracts from pitching in and lending a hand to help supervised 

employees complete the job. Forcing employees back into a time-clock punching, shift 

work model will not be welcome when 74 percent of workers value "being able to work 

flexibly and still be on track for promotion," second only after competitive pay and 

benefits. 5 

In addition to likely triggering large-scale reclassifications to employee detriment, 

this proposal has inherent flaws. Procedurally, the Department creates an impression that 

changes to the duties test will be made based merely on questions posed in the preamble, 

without proposed regulatory text or any of the accompanying analysis, supporting data, or 

economic impact studies. Doing so would mean employers and other regulated parties 

will never have had a chance to review and comment on the specific changes, which 

would be contrary to the intent and spirit of the Administrative Procedure Act, Executive 

Orders 12866 and 13563 on proper rulemaking procedures, and President Obama's own 

Open Government Initiative. 

Also, the economic data relied upon by the Department to support the new salary 

threshold is flawed and does not provide sufficient detail to support the claims made by 

the Department. Similarly, the economic impact analysis provided fails to consider many 

factors and severely underestimates the economic impact of the Department's proposal, 

even without taking into consideration transfer payments related to compliance with 

changing the salary threshold. 

As the Chamber's comments, infra, will demonstrate, the Department's proposal 

should be withdrawn. 

5 Ernst & Young Study, Work-Life Challenges Across Generations (20 15), available at 

http://www .ey .com/US/ en/ About-us/Our-peop le-and-culture/EY -work -life-challenges-across-generationsglobal-study 

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DISCUSSION 

United States Chamber of Commerce 

Comments on RIN 1235-AA11 

The Fair Labor Standards Act, enacted by Congress in 1938 during the Great 

Depression, generally requires covered employers to pay their employees at least the 

federal minimum wage (currently, $7.25 per hour) for all hours worked and overtime pay 

at one and one-half an employee's regular rate of pay for all hours worked over 40 in a 

single workweek. 6 In addition to ensuring additional pay for working over 40 hours, 

Congress intended the Act's overtime pay requirement to encourage employers to spread 

the available work among a larger number of workers and thereby reduce unemployment: 

By this requirement, although overtime was not flatly prohibited, financial 

pressure was applied to spread employment to avoid the extra wage and 

workers were assured additional pay to compensate them for the burden of 

a workweek beyond the hours fixed in the act. In a period of widespread 

unemployment and small profits, the economy inherent in avoiding extra 

pay was expected to have an appreciable effect in the distribution of 

available work. 7 

Although the Department has described the FLSA overtime requirements as a 

"cornerstone of the Act," 8 Congress never intended the overtime requirements to be 

applied universally. As enacted in 1938, and amended through the years since, the FLSA 

includes almost 50 partial or complete exemptions from the Act's overtime requirements. 

A listing of these exemptions is provided in Appendix A. 

Congress included the white collar exemptions in section 13(a)(l) of the original 

1938 act, which exempted from both the minimum wage and overtime requirements "any 

employee employed in a bona fide executive, administrative, professional, or local 

retailing capacity, or in the capacity of outside salesman (as such terms are defined and 

delimited by regulations of the Administrator)." 9 Congress amended section 13(a)(l) in 

1961 to remove the "local retailing capacity" exemption, but also prohibited the 

Department from denying the exemption to retail or service employees who spend less 

than 40 percent of hours worked performing non-exempt tasks. 10 In 1966, Congress 

added academic administrative personnel and teachers to the exemption. 11 Thus, today, 

6 29 U.S.C. §§ 206 (minimum wage), 207 (overtime). 

7 See Overnight Motor Transportation Co. v. Missel, 316 U.S. 572,577-78 (1942). 

8 Notice of Proposed Rule, Defining and Delimiti~g the F-xemptionsjor Executive, Administrative, 

Professional, Outside Sales and Computer Employees, 80 FR 38516, 38510 (July 6, 2015) (hereinafter 

"20 15 NPRM"). 

9 52 Stat. 1060, 1067 (June 25. 1938). 10 P.L. 87-30, 74 Stat. 65 (May 5, 1961). 

"P.L. 89-601,80 Stat. 830 (Sept. 23, 1966). 
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section 13(a)(l) of the FLSA provides an exemption from both the minimum wage and 

overtime requirements for: 

[A]ny employee employed in a bona fide executive, administrative, or 

professional capacity (including any employee employed in the capacity 

of academic administrative personnel or teacher in elementary or 

secondary schools), or in the capacity of outside salesman (as such terms 

are defined and delimited from time to time by regulations of the 

Secretary, subject to the provisions of [the Administrative Procedure Act], 

except that an employee of a retail or service establishment shall not be 

excluded from the definition of employee employed in a bona fide 

executive or administrative capacity because of the number of hours in his 

workweek which he devotes to activities not directly or closely related to 

the performance of executive or administrative activities, if less than 40 

per centum of his hours worked in the workweek are devoted to such 

activities). 12 

Congress did not further define the terms "executive," "administrative," 

"professional" or "outside salesman" in the Act itself. However, the legislative history 

indicates that Congress believed that such employees generally have little need for the 

FLSA protections. As the Department stated in 2004: 

The legislative history indicates that the section 13(a)(l) exemptions were 

premised on the belief that the workers exempted typically earned salaries 

well above the minimum wage, and they were presumed to enjoy other 

compensatory privileges such as above average fringe benefits and better 

opportunities for advancement, setting them apart from the nonexempt 

workers entitled to overtime pay. Further, the type of work they 

performed was difficult to standardize to any time frame and could not be 

easily spread to other workers after 40 hours in a week, making 

compliance with the overtime provisions difficult and generally precluding 

the potential job expansion intended by the FLSA's time-and-a-half 

overtime premium. 13 

12 29 U.S.C. § 213(a)(1). 

" Final Rule, Defining and Delimiting the Exemptions for Executive, Administrative, Profossional, Outside 

Sales and Computer Employees, 69 FR 22122, 22124 (April23, 2004) (hereinafter "2004 Final Rule), 

citing Report of the Minimum Wage Study Commission, Volume IV at 236,240 (June 1981) ("1981 

Commission Report") ("Higher base pay, greater fringe benefits, improved promotion potential and greater 

job security have traditionally been considered as normal compensatory benefits received by EAP 

employees, which set them apart from non-EAP employees."). See also 1981 Commission Report at 243 

("These compensatory privileges include authority over others, opportunity for advancement, paid vacation 

and sick leave, and security of tenure."). 

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United States Chamber of Commerce 

Comments on RIN !235-AAII 

The Department first issued regulations to define and delimit the white collar 

exemptions on October 20, 1938, at 29 C.P.R. Part 541. The original regulations, only 

two columns in the Federal Register, set a minimum salary level for exemption at $30 per 

week and established the job duties employees must perform to qualify for the 

exemptions. 14 Between 1940 and 1975, the Department raised the minimum salary level 

for exemption six times- in 1940, 1949, 1958, 1963, 1970 and 1975- an increase every 

two to nine years. 15 In 1975, the Department raised the minimum salary levels for 

exemption to $155 per week ($8,060 annually) for executive and administrative 

employees and $170 per week ($8,840 annually) for professionals under the "long" duties 

tests, and to $250 per week ($13,000 annually) for the "short" duties tests. 16 

The duties tests for exemption changed less frequently. In 1940, the Department 

adopted a separate duties test for administrative employees for the first time. 17 The 

Department also significantly revised Part 541 in 1949, including the addition of "special 

proviso[s] for high salaried" executive, administrative and professional employees (often 

referred to as the "short tests") and publishing an interpretive bulletin. 18 Between 1949 

and 2004, the Department made other occasional revisions to Part 541, but the basic 

structure and substance of the duties tests for executive, administrative, professional and 

outside sales employees remained unchanged. 19 

The last major revisions to the Part 541 regulations were made in 2004 - 29 years 

after the previous increases to the salary level tests and 55 years after the last significant 

changes to the duties tests (apart from the addition of computer employees). After a 

comprehensive review of legislative and regulatory history, federal court decisions 

interpreting Part 541, salary data and over 75,000 public comments, the Department 

14 3 FR 2518 (Oct. 20, 1938). 15 5 FR4077 (Oct. 10, 1940); 14 FR 7705 (Dec. 24, 1949); 23 FR 8962 (Nov. 18, 1958); 29 FR 9505 

(Aug. 30, 1963); 35 FR 883 (Jan. 22, 1970); 40 FR 7091 (Feb. 19, 1975). 

16 40 FR 7091 (Feb. 19, 1975). 

17 5 FR 4077 (Oct. !0, !940). See also "Executive, Administrative, Professional. . Outside Salesman" 

Redefined, Wage and Hour Division, U.S. Department of Labor, Report and Recommendations of the 

Presiding Officer (Harold Stein) at Hearings Preliminary to Redefinition (Oct. 10, 1940) ("1940 Stein 

Report"). 

18 14 FR 7705 (Dec. 24, 1949) (final regulations); 14 FR 7730 (Dec. 28, 1949) (interpretive bulletin 

published as Subpart B of Part 541). See also Report and Recommendations on Proposed Revisions of 

Regulations, Part 541, Harry Weiss, Presiding Officer, Wage and Hour and Public Contracts Divisions, 

U.S. Department of Labor (June 30, 1949) ("1949 Weiss Report"). 19 In 1954, the Department revised the regulatory interpretations of the "salary basis" test. 19 FR 4405 (July 

17, 1954). In 1961, the Department revised Part 541 to implement FLSA amendments eliminating the 

exemption for employees employed in a "local retail capacity." 26 FR 8635 (Sept. 15, 1961). The 

Department revised Part 541 in 1967 to implement an FLSA amendment extending the exemption to 

academic administrative personnel and teachers. The Department revised Part 541 twice in 1992. First, at 

the direction of Congress, the Department revised the duties tests to allow certain computer employees to 

qualify as exempt professionals. 57 FR 46742 (Oct. 9, 1992). Second, the Department modified the salary 

basis test for public employees. 57 FR 37666 (Aug. 19, 1992). 

7 
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Comments on RIN 1235-AAII 

replaced the long-inoperative "long" duties tests with new standard duties tests (with 

requirements intended as a middle ground between the "long" and "short" tests), and 

raised the minimum salary level for exemption from $155/$170 per week ($8,060/$8,840 

annually) to $455 per week ($23,660 annually). 20 In addition, the Department replaced 

the "special proviso[s] for high salaried" employees and its "short test" salary level of 

$250 per week ($13,000 annually) with a highly compensated test applicable to 

employees with annual compensation of at least $100,000. 21 

Since 1940, the Part 541 regulations have included three tests that employees 

must meet before qualifying for exemption: First, employees must be paid at least the 

minimum salary level for exemption established in the regulations, currently $455 per 

week ($23,660 annually) as set in 2004. 22 Second, employees must be paid on a "salary 

basis." An employee is paid on a salary basis "if the employee regularly receives each 

pay period on a weekly, or less frequent basis, a predetermined amount constituting all or 

part of the employee's compensation, which amount is not subject to reduction because 

of variations in the quality or quantity of the work performed."23 Third, the employees 

must have a primary duty of performing the exempt executive, administrative, 

professional, computer or outside sales job duties. 24 Highly compensated employees, 

currently defined as employees with total annual compensation of at least $100,000, are 

exempt if they customarily and regularly perform at least one of the exempt duties of an 

executive, administrative or professional employee. 25 

On the salary level tests, the Department has proposed to set the minimum salary 

required for exemption at the 40th percentile of weekly earnings for full-time salaried 

20 Although section 13(a)(l) provides exemptions from both minimum wage and overtime, as the 

Department recognizes, "its most significant impact is its removal ofthese employees from the Act's 

overtime protections." 2015 NPRM at 38519. In fact, because the minimum salary level for exemption of 

executive, administrative and professional employees has always been set well above the minimum wage, 

such employees de facto are protected by the FLSA's minimum wage requirement. See 1981 Commission 

Report at 240 ("Employees paid below the salary test level must be paid premium rates for work in excess 

of 40 hours per week. Since salaries of exempt employees are usually well above the minimum wage, and 

the employer is under no obligation to pay wages equal to the salary test level, this is, in effect, a maximum 

hour exemption."). However, because of the 29 years that passed between the salary level increases of 1975 

and 2004, the $155/$250 salary levels for exemption under the "long" duties tests was barely above the 

minimum wage for a 40 hour workweek by 1980 (when minimum wage increased to $3.10 per hour) and 

below the minimum wage beginning in 1991 (when minimum wage increased to $4.25 per hour). Thus, in 

2004, the "long" duties tests had been effectively inoperative for almost 25 years. 

21 2004 Final Rule at 22123. 

22 29 C.F.R. § 541.600. 

23 29 C.F.R. § 541.602. Teacher, doctors, lawyers and outside sales employees are not subject to the salary 

level and salary basis tests. 29 C.F.R. § 541.303(d) (teachers); 29 C.F.R. § 541.304(d) (doctors and 

lawyers); 29 C.F.R. § 541.500(c) (outside sales). In addition, exempt computer employees may be paid by 

the hour. 29 U.S.C. § 213(a)(17); 541.29 C.F.R. § 541.400(b). 24 29 C.F.R. § 541.100 (executives); 29 C.F.R. § 541.200 (administrative employees); 29 C.F.R. § 541.300 

(professionals); 29 C.F.R. § 541.400 (computer); 29 C.F.R. § 541.500 (outside sales). 25 29 C.F.R. § 541.60 l. 

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United States Chamber of Commerce 

Comments on RIN 1235-AAll 

workers.26 Currently, based on 2013 data from the Bureau of Labor Statistics (BLS), this 

would amount to a minimum salary of $921 per week or $47,892 annually. 27 However, 

the Department expects that the 40th percentile will increase to $970 per week or $50,440 

annually by the time a final rule is issued in 20 16.28 The Department seeks comments on 

whether "to permit nondiscretionary bonuses and incentive payments to count toward 

partial satisfaction of the salary level test."29 The Department also proposes to increase 

the total annual compensation requirement needed to exempt highly compensated 

employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of 

full-time salaried workers, which is estimated at $122,148 annually. 3

° Finally, the 

Department proposes to establish a mechanism for automatically updating the salary 

levels on an annual basis using either the 40th (standard test) and 90th (HCE test) 

percentiles or based on an inflationary measure (the CPI-U). 31 

Whether the Department is proposing changes to the duties tests is far from clear. 

In the NPRM, the Department states that it "is not proposing specific regulatory changes 

at this time."32 Rather, the DOL only "seeks to determine whether, in light of our salary 

level proposal, changes to the duties tests are also warranted" and "invites comments on 

whether adjustments to the duties tests are necessary, particularly in light of the proposed 

change in the salary level test." 33 The Department then requests comments on the 

following issues: 

A. What, if any, changes should be made to the duties tests? 

B. Should employees be required to spend a minimum amount of time 

performing work that is their primary duty in order to qualify for 

exemption? If so, what should that minimum amount be? 

C. Should the Department look to the State of California's law 

(requiring that 50 percent of an employee's time be spent 

exclusively on work that is the employee's primary duty) as a 

model? Is some other threshold that is less than 50 percent of an 

employee's time worked a better indicator of the realities of the 

workplace today? 

26 2015 NPRM at 38517. 

27 Jd. 

2s !d., n.l. 

29 Jd. at 38536. 

30 I d. at 38537. 

31 /d. at 38524, 38537-42. 

32 Jd. at 38543. 

33 Jd. 

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Comments on RIN 1235-AA11 

D. Does the single standard duties test for each exemption category 

appropriately distinguish between exempt and nonexempt 

employees? Should the Department reconsider our decision to 

eliminate the long/short duties tests structure? 

E. Is the concurrent duties regulation for executive employees 

(allowing the performance of both exempt and nonexempt duties 

concurrently) working appropriately or does it need to be modified 

to avoid sweeping nonexempt employees into the exemption? 

Alternatively, should there be a limitation on the amount of 

nonexempt work? To what extent are exempt lower-level executive 

employees performing nonexempt work? 34 

In addition, "the Department is also considering whether to add to the regulations 

examples of additional occupations to provide guidance" on "how the general executive, 

administrative, and professional exemption criteria may apply to specific occupations." 35 

The Department also "requests comments from employer and employee stakeholders in 

the computer and information technology sectors as to what additional occupational titles 

or categories should be included as examples in the part 541 regulations."36 

I. THE DEPARTMENT'S PROPOSAL TO SET THE MINIMUM SALARY 

LEVEL USING THE 40TH PERCENTILE OF WAGES EARNED BY NONHOURLY EMPLOYEES, WILL EXCLUDE MILLIONS OF EMPLOYEES 

WHO MEET THE DUTIES TESTS FOR EXEMPTION, CONTRARY TO 

THE INTENT OF CONGRESS 

A. THE DEPARTMENT HAS LONG RECOGNIZED THAT THE PURPOSE OF THE 

SALARY LEVEL TEST IS TO EXCLUDE ONLY "OBVIOUSLY" NON-EXEMPT 

EMPLOYEES 

Section 13(a)(l) of the Act exempts executive, administrative and professional 

employees from the FLSA minimum wage and overtime requirements. Thus, although 

Congress granted the Department authority to define and delimit the white collar 

exemptions, the agency has long acknowledged that it "is not authorized to set wages or 

salaries for executive, administrative and professional employees. Consequently, 

improving the conditions of such employees is not the objective of the regulations." 37 

34 /d. at 38543. 

35 ld. 

36 Id 

37 1949 Weiss Report at 11 (emphasis added). 

10 
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United States Chamber of Commerce 

Comments on RIN 1235-AAII 

Rather, the purpose of the salary level test is "screening out the obviously 

nonexempt employees." 38 "The salary tests in the regulations are essentially guides to 

help in distinguishing bona fide executive, administrative, and professional employees 

from those who were not intended by the Congress to come within these categories. Any 

increase in the salary levels from those contained in the present regulations must, 

therefore, have as its primary objective the drawing of a line separating exempt from 

nonexempt employees rather than the improvement of the status of such employees."39 

Thus, while the salary level selected may "deny exemption to a few employees 

who might not unreasonably be exempted," the Department ignores congressional intent 

to its peril by setting the minimum salary level for exemption so high as to exclude from 

the exemption millions of employees who would meet the duties requirements. 40 The 

salary level tests should not be set at a level that would result "in defeating the exemption 

for any substantial number of individuals who could reasonably be classified for 

purposes of the Act as bonafide executive, administrative, or professional employees. "

41 

In addition, regulations of such "general applicability ... must be drawn in 

general terms to apply to many thousands of different situations throughout the 

country." 42 As the Department stated in 1949: "To be sure, salaries vary, industry by 

industry, and in different parts of the country, and it undoubtedly occurs that an employee 

may have a high order of responsibility without a commensurate salary." 43 Thus, to avoid 

excluding millions of employees from the exemption who do perform exempt job duties, 

the Department has recognized that "the same salary cannot operate with equal effect as a 

test in high-wage and low-wage industries and regions, and in metropolitan and rural 

areas, in an economy as complex and diversified as that of the United States. Despite the 

variation in effect, however, it is clear that the objectives of the salary tests will be 

accomplished if the levels selected are set at points near the lower end of the current 

range of salaries"44 of exempt employees "in the lowest-wage region, or in the smallest 

size establishment group, or in the smallest-sized city group, or in the lowest-wage 

industry." 45 

38 Id at 8 (emphasis added). See also 1958 Kantor Report at 2-3 ("Essentially, the salary tests are guides to 

assist in distinguishing bona fide executive, administrative, and professional employees from those who 

were not intended by the Congress to come within these categories. They furnish a practical guide to the 

investigator as well as to employers and employees in borderline cases, and simplify enforcement by 

providing a ready method of screening out the obviously non-exempt employee."). 

39 1949 Weiss Report at II. See also 1958 Kantor Report at 2-3. 

40 1940 Stein Report at 6 (emphasis added). 

41 1949 Weiss Report at 9 (emphasis added). 

42 Id 

43 Id at I l. 

44 195 8 Kantor Report at 5. 

45 Id at 6-7. See also 1940 Stein Report at 32 ("Furthermore, these figures are averages, and the Act applies 

to low-wage areas and industries as well as to high-wage groups. Caution therefore dictates the adoption of 

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United States Chamber of Commerce 

Comments on R!N 1235-AA11 

As discussed in more detail below, the Department's proposal to increase the 

minimum salary level for exemption based on the 40th percentile of earnings for all nonhourly workers - resulting in an estimated minimum salary of $50,440- quotes but then 

ignores these accepted purposes and principals with little or no justification. In the past, 

the Department has used data on salaries of exempt employees. Today, the Department 

uses earnings data for all "non-hourly" paid employees, whether exempt or nonexempt, 

and including employees not covered by the Part 541 salary tests, with no reasonable 

basis for distinguishing salaries of exempt versus non-exempt employees. In the past, the 

Department has looked to salaries of exempt employees in the lowest-wage region, the 

smallest size establishment group, the smallest-sized city group, and the lowest-wage 

industry. Today, the Department uses only national data, ignoring the disproportionate 

impact that so doing will have for employers in these groups. In the past, the Department 

has looked to the lOth, 15th and 20th percentile of exempt employee salaries. Today, the 

Department proposes using the 40th percentile of earnings for all non-hourly paid 

employees based on the mistaken justification that the current standard duties tests are 

equivalent to the old "long" duties tests. The Department's proposed $50,440 minimum 

salary level, in short, is a result in search of a reasoned methodology; but, under any 

supportable methodology, the Department's proposal is at least $1 0,000 to $20,000 too 

high. 

B. SETTING THE MINIMUM SALARY LEVEL AT THE 40TH PERCENTILE OF 

EARNINGS OF ALL "NON-HOURLY" PAID EMPLOYEES IGNORES 77 YEARS 

OF LEGISLATIVE HISTORY, REGULATORY HISTORY AND CHANGES To THE 

AMERICAN ECONOMY 

With few exceptions, historically, the Department set the minimum salary level 

for exemption by studying the salaries actually paid to exempt employees and setting the 

salary at no higher than the 20th percentile in the lowest-wage regions, the smallest size 

establishment groups, the smallest-sized cities and the lowest-wage industries. In 1949, 

for example, the Department examined data on increases in salaries for exempt 

employees since the 1940 increases, compared that data with the earnings of nonexempt 

employees, and then set a salary level lower than the data indicated to account for lowerwage industries and small businesses. 46 

To set the salary level in 1958, the Department compiled salary data for 

employees who had been found exempt during wage-hour investigations over an 

a figure that is somewhat lower, though ofthe same general magnitude."); 1949 Weiss Report at 11-12 

("Any new figure recommended should also be somewhere near the lower end of the range of prevailing 

salaries for these employees."); 1949 Weiss Report at 14 ("Consideration must also be given to the fact that 

executives in many of the smaller establishments are not as well paid as executives employed by larger 

enterprises."); 1949 Weiss Report at 15 ("The salary test for bona fide executives must not be so high as to 

exclude large numbers of the executives of small establishments from the exemption."). 46 1949 Weiss Report at 12-15. 

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Comments on RIN 1235-AAll 

eight-month period in 1955, grouping employees "by major geographic regions, by 

number of employees in the establishment, by size of city, and by broad industry 

groups."47 The Department's report also included published materials on how salary 

levels had changed since 1949 and information on starting salaries of college 

graduates.''48 Based on this data, the Department set the salary level so that "no more 

than about 10 percent of those in the lowest-wage region, or in the smallest size 

establishment group, or in the smallest-sized city group, or in the lowest-wage industry of 

each of the categories would fail to meet the tests."49 

Again, in 1963, the Department relied on a special survey by the Wage and Hour 

Division ("WHO') on salaries paid to exempt employees, and increased the salary level 

to "bear approximately the same relationship to the minimum salaries reflected in the 

1961 survey data as the tests adopted in 1958."50 

In 1970, the Department adopted a minimum salary level for executives of $125 

per week, when salary data on "executive employees who were determined to be exempt 

in establishments investigated by the Divisions between May and October 1968 for all 

regions in the United States, 20 percent received less than $130 per week, whereas only 

12 percent of such executives employees in the West and 14 percent in the Northeast 

received salaries ofless than $130 per week." 51 

The rulemaking in 1975 was anomalous: The Department based the salary 

increase on the Consumer Price Index, rather than a percentile, but also stated that the 

increase was not "to be considered a precedent."52 

In 2004, the Department considered data "showing the salary levels of the bottom 

I 0 percent, 15 percent and 20 percent of all salaried employees, and salaried employees 

in the lower wage South and retail sectors."53 The Department set the minimum salary 

level at $455 per week ($23,660 annually), the 20th percentile for salaried employees in 

the South region and retail industry, rather than at the I Oth percentile as in 1958, to 

account for the proposed change from the "short" and "long" test structure and because 

the data included nonexempt salaried employees." 54 

47 1958 Kantor Report at 6. 

48 ld. 

49 ld at 7-8. 

50 28 FR 7002, 7004 (July 9, 1963). 

51 35 FR 883,884 (Jan. 22, 1970). 

52 40 FR 7091, 7092 (Feb. 19, 1975). During a private conversation in 2001 between incoming Wage & 

Hour Administrator Tammy D. McCutchen and Betty Southard Murphy, the Administrator in 1975, 

Ms. Murphy stated that the 197 5 Final Rule was finalized before a wage survey could be completed so she 

could take up her new post as a Chair of the National Labor Relations Board. 53 2004 Final Rule at 22167 & Table 2. 54 2004 Final Rule at 22168-69 & Table 3. 

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Comments on RIN 1235-AA11 

Departing from the historical methodologies to use the 40th percentile of earnings 

for all non-hourly employees ignores the fact that most retail and service employees were 

exempt untill961. As originally enacted, section 13(a)(1) ofthe FLSA exempted "any 

employee employed in a ... local retailing capacity" from the minimum wage and 

overtime requirements, and section 13(a)(2) included an exemption for "any employee 

engaged in any retail or service establishment the greater part of whose selling or 

servicing is in intrastate commerce."55 In 1949, Congress amended section 13(a)(2) to 

cover employees of retail establishments with more than 50 percent of sales "made within 

the State in which the establishment is located."56 Because of these exemptions, during 

this time period, only "three percent of the retail trade workers were estimated to be 

subject to the wage and hour provisions of the FLSA. " 57 In 1961, Congress amended the 

FLSA to eliminate the "local retailing capacity" exemption in section 13(a)(1) and limit 

the section 13(a)(2) retail exemption to establishments with less than $250,000 in annual 

sales. 58 After the 1961 amendments, the Department of Labor estimated that 2.2 million 

employees came within the scope of the Act. 59 Later amendments further restricted the 

retail exemption until it was repealed completely in 1989. 60 

Thus, when the Department set the salary level at the I Oth percentile of exempt 

employee salaries in 1958, that data set did not include exempt salaries of retail 

employees, a lower-wage industry. Rather, the 1958 data would have included salary 

information in industries such as manufacturing and construction, the primary focus of 

the FLSA protections at the time. If data on exempt salaries in the retail industry had 

been included in 1958, the salary level selected certainly would have been below the 1Oth 

percentile. 

In preparation for the 1963 rulemaking, the Department conducted a special 

survey in June 1962 to gather data "on minimum weekly salaries paid executive, 

administrative and professional employee in retail establishments."61 The survey 

confirmed that exempt executive, administrative and professional employees in retail 

earned less than exempt employees in other industries: "The survey data indicate that in 

the type of establishment in which all employees would have qualified for the 'retail' 

exemption under section 13(a) (2) of the act, 29 percent ofthe executive and 32 percent 

of the administrative employees were paid less than $100 a week. Thirteen percent of the 

executive employees and 19 percent of the administrative employees were paid less than 

$80 a week." Thus, the Department established lower salary levels for the retail industry 

55 29 U.S.C. § 213(a)(2), P.L. 718,52 Stat. 1060, 1067 (June 25, 1938). 56 P.L. 393,63 Stat. 910,916 (Oct. 26, 1949. 

57 19 81 Commission Report at 14, 58 P.L. 87-30, 75 Stat. 65, 71 (May 5, 196 I) 

59 1981 Commission Report at 17. 60 P.L. 101-157, 103 Stat. 939 (Nov. 17, 1989). 61 28 FRat 7002. 

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Comments on RIN 1235-AAII 

effective until September 1965: $80 per week for executive and administrative 

employees (instead of$100 for other industries); $95 per week for professionals (instead 

of $115), and $125 per week under the "short" duties test (instead of $150). 62 By 1965, 

the Department expected retail salaries to increase as the industry adjusted to its new 

coverage under the FLSA. 63 Perhaps most instructive in this regulatory history, the 

Department rejected salary levels for retail employees at the 29th and 32nd percentiles, 

instead adopting salary levels at the 13th and 19th percentile. 64 

Changes to the American economy and jobs also support a lower percentile, not a 

higher one. The Department makes much of the fact that the percentage of employees 

eligible for overtime has allegedly eroded significantly: "In 1975, 62 percent offull-time 

salaried workers were eligible for overtime pay; but today, only 8 percent of full-time 

salaried workers fall below the salary threshold and are automatically eligible for 

overtime pay." 65 However, these statistics ignore the revolutionary changes to our 

economy since the 1975 salary increases and certainly since Congress passed the FLSA 

in 1938. Thus, the alleged changes in the number of exempt employees cannot withstand 

even cursory scrutiny or provide support for the Department's proposal. 

One indicator of exempt status is level of education- not only for the professional 

exemption, but for all of the white collar exemptions. Possession of a Bachelors, Masters 

or Doctoral degree is a key indicator that an employee, using that degree in his work, is 

performing job duties at a sufficiently high level to qualify for the exemption. According 

to U.S. Census data, in 1940, only 4.6 percent of Americans had completed four years of 

college, increasing to 11 percent by 1970. Today, 34 percent of Americans hold 

Bachelors, Masters or Doctoral degrees. 

In addition, the American economy has steadily moved away from blue collar 

manufacturing jobs that could be performed by unskilled and low-skilled workers to 

white collar jobs in service industries which require employees to perform job duties 

requiring more knowledge and judgment. In 1939, the year after Congress passed the 

FLSA, 35.5 percent of American workers were employed in manufacturing, but by 2014, 

that proportion had fallen to 10.4 percent. During the same time period, the more 

educated workforce in the professional and business services sector grew from 7.4 

percent of all jobs in 1939 to 16.3 percent of jobs in 2014, according to the BLS Current 

Employment Statistics surveys. 

62 28 FRat 7005; 28 FR 9505, 9506 (Aug. 30, 1963) 63 28 FR at 7005. 

64 ld 

65 5 Million Reasons Why We're Updating Overtime Protections, Secretary Tom Perez (July I, 2015), 

available at http://blog.dol.gov /2015/07/0 I /5-mi llions-reasons-why-were-updating-overtime-protections/. 

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These two incontrovertible facts can lead to only one conclusion: Today, more 

employees are performing exempt executive, administrative and professional work than 

ever before in the history of the United States. Thus, there is no justification for 

increasing the percentile used to set the salary level in an attempt to bring the same 

percentage of employees within the overtime protections as there were in 1975. 

C. THE DEPARTMENT'S 20TH PERCENTILE METHODOLOGY IN 2004 WAS 

SUFFICIENT To ACCOUNT FOR CHANGES IN THE DUTIES TESTS 

The Department's sole, but oft-repeated justification for proposing a salary level 

at the 40th percentile quadrupling the percentile used in 195 8 - is that the 2004 salary 

level was too low to adequately compensate for changes in the duties tests: 

• "The proposed increase to the standard salary level is also intended to 

address the Department's conclusion that the salary level set in 2004 

was too low to efficiently screen out from the exemption overtimeprotected white collar employees when paired with the standard duties 

test.''66 

• "The Department believes that the proposed salary compensates for 

the absence of a long test ... .''67 

• "A standard salary threshold significantly below the 40th percentile, or 

the absence of a mechanism for automatically updating the salary 

level, however, would require a more rigorous duties test than the 

current standard duties test ... .''68 

• "The Department set the standard salary level in 2004 equivalent to the 

former long test salary level, thus not adjusting the salary threshold to 

account for the absence of the more rigorous long duties test.''69 

• "The Department in the 2004 Final Rule based the new 'standard' 

duties tests on the short duties tests (which did not limit the amount of 

nonexempt work that could be performed), and tied them to a single 

salary test level that was updated from the long test salary (which 

historically had been paired with a cap on nonexempt work)."70 

66 2015 NPRM at 38517. 

67 Id 

68 Id at 38519. 

69 ld 

70 Id at 38526. 

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• "However, the higher percentile proposed here is necessary to correct 

for the current pairing of a salary based on the lower salary long test 

with a duties test based on the less rigorous short duties test, and 

ensure that the proposed salary is consistent with the Department's 

longstanding goal of finding an appropriate line of demarcation 

between exempt and nonexempt employees." 71 

• "The proposed percentile diverges from the percentiles adopted in both 

the 2004 Final Rule and the Kantor method because it more fully 

accounts for the Department's elimination of the long duties test." 72 

• "Based on further consideration of our analysis of the 2004 salary, the 

Department has now concluded that the $455 salary level did not 

adequately account for both the shift to a sample including all salaried 

workers covered by the part 541 regulations, rather than just EAP 

exempt workers, and the elimination of the long duties test that had 

historically been paired with the lower salary level. Accordingly, this 

proposal is intended to correct for that error by setting a salary level 

that fully accounts for the fact that the standard duties test is 

significantly less rigorous than the long duties test and, therefore, the 

salary threshold must play a greater role in protecting overtimeeligible employees." 73 

• "This is the first time that the Department has needed to correct for 

such a mismatch between the existing salary level and the applicable 

duties test. ... The creation of a single standard test based on the less 

rigorous short duties test caused new uncertainty as to what salary 

level is sufficient to ensure that employees intended to be overtimeprotected are not subject to inappropriate classification as exempt, 

while minimizing the number of employees disqualified from the 

exemption even though their primary duty is EAP exempt work."74 

• "However, although the Department recognized the need to make an 

adjustment because of the elimination of the long duties test, the 

amount of the increase in the required salary actually only accounted 

for the fact that the data set used to set the salary level included 

71 Id at 38529. 

12 !d 

73 Id 

74 Id 

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nonexempt workers while the Kantor method considered only the 

salaries paid to exempt employees."75 

• "Setting the standard salary level at the 40th percentile of earnings for 

full-time salaried workers would effectively correct for the 

Department's establishment in the 2004 Final Rule of a single standard 

duties test that was equivalent to the former short duties test without a 

correspondingly higher salary level." 76 

• To remedy the Department's error from 2004 of pairing the lower long 

test salary with the less stringent short test duties, the Department is 

setting the salary level within the range of the historical short test 

salary ratio so that it will work appropriately with the current standard 

duties test." 77 

Repeating the same assertion a dozen times does not make it true or justify 

quadrupling the Department's I Oth percentile methodology from 1958 to the 40th 

percentile. The Department's assertion that the 2004 salary level was too low to 

adequately compensate for changes in the duties is problematic for several reasons. 

First, as noted above, the 1958 data did not include retail employees, who 

generally earned less than the production employees who were included in that 

data. 78 Thus, an expanded 1958 data set that had included retail employees would have 

yielded a lower dollar threshold corresponding to the 1Oth percentile than the dollar 

threshold actually recommended in 1958. 

Second, as the Department noted both in 2004 and in this rulemaking, the agency 

historically used salary data that included exempt employees only. The CPS data 

includes both exempt and non-exempt data, lumped together. As discussed more fully in 

section VI, the only attempt by the Department has ever made to distinguish between 

exempt and non-exempt employees in the CPS data was in 1998 when WHD staff 

attempted to assign probabilities on whether employees in a CPS job title were exempt. 

As every wage and hour investigator learns in her basic training class, and as stated in the 

Part 541 regulations, a "job title alone is insufficient to establish the exempt status of an 

employee."79 In fact, more often than not, investigators find job titles misleading and 

also refuse to credit statements about duties in job descriptions because the "exempt or 

nonexempt status of any particular employee must be determined on the basis of whether 

75 ld at 38530. 

16 Id at 38531. 

11 Jd See also id at 38532, 38534, 38560, and 38562. 78 See, e.g., 28 FRat 7005; 28 FRat 9506. 

1

' 29 C.F.R. § 541.2. 

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the employee's salary and duties meet the requirements" for exemption. 80 As 

investigators know, such determinations can only be made after interviewing witnesses 

who are familiar with the actual job duties performed. And now, in 2015, the DOL's 

guesses at identifying exempt versus non-exempt employees in the CPS data set is 17 

years out of date! No apparent attempt has been made to duplicate or validate the 

Department's 17-year-old assumptions about job duties and exempt status. Thus, the 

Department's conclusion that the 20th percentile used in 2004 only accounted for the 

difference in the data is highly suspicious or totally unsupported. And, without this 

foundation, the superstructure built upon it collapses. 

Third, the 2004 standard duties tests are not equivalent to the old "long" tests. 

For example, the pre-2004 "short" test for the executive exemption required only that the 

employee have a primary duty of managing the enterprise (or a recognized department or 

subdivision thereof) and customarily and regularly direct the work of two or more other 

employees. 81 The 2004 regulations added a third requirement: "the authority to hire or 

fire other employees or whose suggestions and recommendations as to the hiring, firing, 

advancement, promotion or any other change of status of other employees are given 

particular weight." 82 This new requirement under the standard test was taken from the 

pre-2004 "long" test. 83 Thus, the standard duties test for the executive exemption is more 

difficult to meet than the pre-2004 "short" test. 84 The Department's methodology for 

increasing the salary level makes no effort to acknowledge or account for this difference. 

Fourth, the Department's reliance on the 1975 "long" test salary levels is 

similarly misplaced. The salary levels adopted in 1975 are anomalies. The Department 

set these rates in a very truncated process, without the benefit of a wage survey. The 

Department based the salary increase on the Consumer Price Index, rather than a 

percentile, but also stated that the increase was not "to be considered a precedent."85 Yet, 

here in 2015, the Department is doing exactly that- using 1975 as a precedent- to the 

exclusion of all other comparators. 

While the current standard duties tests do not include a 20 percent restriction ( 40 

percent in retail or services establishments) on work activities that are not directly related 

to an employee's exempt duty, this does not have the significance that the Department 

80 Jd 

" 68 FR 15560 (April23, 2003). 

82 29C.F.R. § 541.100. 

83 2004 Final Rule at 22127. 

84 Should the Department review the public comments filed in response to the 2003 Notice of Proposed 

Rulemaking, it will find that most employer groups objected to this change. 

"40 FR 7091,7092 (Feb. 19, 1975). During a private conversation in 2001 between incoming Wage and 

Hour Administrator Tammy D. McCutchen and Betty Southard Murphy, the Administrator in 1975, 

Ms. Murphy stated that the 1975 Final Rule was finalized before a wage survey could be completed so she 

could take up her new post as a Chair of the National Labor Relations Board. 

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would give it. Because of the 29 years that passed between the salary level increases of 

1975 and 2004, the $155/$170 salary levels for exemption under the "long" duties tests, 

on which the Department so heavily relies, were barely above the minimum wage for a 

40-hour workweek by 1980 (when minimum wage increased to $3.10 per hour) and 

below the minimum wage beginning in 1991 (when minimum wage increased to $4.25 

per hour). Thus, in 2004, the "long" duties tests had been effectively inoperative for 

almost 25 years and were not functioning to distinguish between exempt and non-exempt 

employees. The Department's reasons, then, for not returning to a 20 percent restriction, 

already dead for 25 years, are even more compelling today with the 20 percent restriction 

now 36 years dead. 86 

Even without these significant faults in its analysis, the Department has failed to 

adequately justify quadrupling the historical 1Oth percentile to set the salary level based 

on the 40th percentile. The Department does not appear to have seriously considered less 

burdensome options: some percentile greater than I 0 but lower than 40; using salary 

levels in lower wage regions or industries; using salary levels in rural areas and small 

businesses. Nor did the Department adequately explore options other than the percentile 

method. As set forth in the following section, examining all the possible methodologies 

and measures reveals that the 40th percentile methodology is an outlier- reverse 

engineered to get a pre-determined, desired result. 87 

D. THE DEPARTMENT'S PROPOSED MINIMUM SALARY LEVEL IS TOO HIGH 

UNDER ANY OTHER METHODOLOGY 

The application of other measures and methodologies results in salary levels 

thousands of dollars below the $50,440 proposed by the Department. Although these 

other methodologies have not been applied as often as a percentile method, many have 

been considered by the Department over the years as an additional data point. The 

Department should not give such short shrift to this information, particularly as the 

results appear consistent between and among the other methodologies. 

86 2004 Final Rule at 22126-28. 

87 See e.g.. Updating Overtime Rules Could Raise the Wages for Millions, Ross Eisenbrey (March 12, 

2014) ("We are pleased that the president is directing the Department of Labor to update overtime 

regulations, a policy change that I have previously proposed. About I 0 million workers could benefit from 

a rule that makes clear that anyone earning less than $50,000 a year is not exempt from overtime 

requirements and must be paid time-and-a-half for any work they do past 40 hours a week."), available at 

http://www.epi.orglpublication/updating-overtime-rules-raise-wages-millions/. 

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If it uses the CPS data set for non-hourly paid workers, 88 the Department should 

use a lower percentile. A salary level at the I Oth, 20th and 30th percentiles would be 

consistent with the history of the Part 541 regulations and better reflect the actual 

dividing line between exempt and non-exempt employees. 89 As shown in Table I, the 

I Oth percentile would result in a salary level of $26.000; over 30 percent of non-exempt 

hourly employees in the data set earn below that level. The 20th percentile would result 

in a salary level of $34,996; over 50 percent of non-exempt hourly employees earn below 

that level. The 30th percentile would result in a salary level of $40,820; almost 70 

percent of non-exempt hourly employees earn below this level. 

Source: Current Population Survey, Public Use Micro data File, Merged 12 months outgoing 

rotations (Earner Study) supplement. 

88 As discussed in section VI below, the Department errs by relying solely on CPS data. However, if the 

Department will not use alternative (and better) data sources, we suggest that the agency should consider 

alternative sets of CPS data in setting the salary level. 

80 1958 Kantor Report at 6-7 (I Oth percentile); 1963 Final Rule, 28 FRat 7005 (13th and 17th percentile of 

retail employees); 2004 Final Rule at 22168-69 & Table 3 (1Oth. 15th and 20th percentiles). 

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2. Earnings in the lowest wage regions and industries and in small 

businesse~· and communities 

Since 1940, the Department has considered salaries in the lowest wage regions 

and industries and in small businesses or rural communities. 90 As shown in Table I, 

setting the salary level at the I Oth percentile of earnings in the South and retail sectors 

would result in a salary level of $24,024; over 20 percent of non-exempt hourly 

employees in the data set earn below that level. The 20th percentile would result in a 

salary level of $31 ,200; almost 40 percent of non-exempt hourly employees earn below 

that level. The 30th percentile would result in a salary level of $38,376; over 50 percent 

of non-exempt hourly employees earn below this level. The 40th percentile would result 

in a salary level of $44,616; almost 60 percent of non-exempt hourly workers earn below 

this level. 

The Department's proposal to set the salary level at the 40th percentile of 

earnings for all non-hourly paid employees nationwide would have a disproportionate 

impact on businesses in states such as Arkansas, Florida, Louisiana, Mississippi, North 

Carolina, Oklahoma, Tennessee and West Virginia where more than 50 percent of nonhourly paid workers earn less than $970 per week ($50,440 annually). 91 In fact, the 40th 

percentile of non-hourly paid employees is below $970 in 26 states. 92 If the Department 

refuses to apply a lower percentile to set the salary level, the Department should consider 

setting the salary level based on the 40th percentile in the three states with the lowest 

salaries Louisiana, Mississippi and Oklahoma- or, at $784 per week ($40,786). 93 

Because of the Department's refusal to grant an extension of the comment 

period, 94 the Chamber cannot provide data on salary levels of exempt employees in small 

businesses and communities. However, a 20!3 study found that the average annual 

90 1940 Stein Report at 32; 1949 Weiss Report at 14-15; 1958 Kantor Report at 5-6; 1963 Final Rule, 28 FR 

at 7705; 1970 Final Rule, 35 FRat 884; 2004 Final Rule at 22168-69. 

91 See O:>ford Economics Study (Aug. 18, 2015), attached as Appendix B. 

92 Jd (Alabama, Arkansas, Florida, Georgia, Hawaii, Idaho, Indiana, Kentucky, Louisiana, Maine, 

Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, 

Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah and West Virginia) 

93 ld 

94 The Chamber, as well as many others, requested an extension of the comment deadline. See Appendix C. 

The Chamber's request was specifically predicated on the need to conduct more research and do the work 

the Department would not. Alas, despite signals that an extension would be granted, the definitive rejection 

of the request was not received until Monday August 31. 

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salary for a small business owner is only $68,000. 95 The Department should gather and 

examine such data itself before issuing a final rule. 96 

3. Relationship to the minimum wage 

The Department should also consider the relationship between the minimum wage 

and the Part 541 salary levels. As shown in Table 2, in years when the Department has 

increased the Part 541 salary level, the ratio of the salary level to minimum wage spanned 

from a low of \.85 in \975 to a high of 6.25 in 1949. Applying the median of 2.38 would 

result in a salary level of $690.20 per week ($35,890.40 annually). 

4. Historical annual percentage of increases 

Historically, with only two exceptions, as shown in Table 3 below, the 

Department has increased the salary levels at a rate of between 2. 78 percent and 5.56 

percent per year, with a median of 4.25 percent. The Department's proposed increase to 

$50,440 represents an increase of9.43 percent per year. 97 Over the last decade, salaries 

did not increase on average by 9.43 percent annually. Employment Cost Index data from 

BLS shows that for 2004 through 2014, earnings for all wage and salary workers 

95 "And, the Average Entrepreneur's Salary Is. . ",Business News Daily (Oct 18, 2013), available at 

http://www.businessnewsdaily.com/53!4-entrepreneur-salaries.html. 

96 Considering salaries paid to exempt employees in small businesses is particularly important given the 

$500,000 in annual gross volume of sales required for enterprise coverage under the FLSA, 29 U.S.C. § 

203(s)(l)(ii), has not been amended since 1989. Today, the $500,000 standard excludes only the smallest of 

small business from the FLSA. The Small Business Administration, for example, defines nonmanufacturing 

small businesses as those with $7.5 million in average annual receipts. See 

https://www.sba.gov/content/summary-size-standards-industry-sector. 

97 This percentage rate is the average per year across the 12 year period. It is not the compound growth rate. 

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increased 27.1 percent cumulatively over the period- 2.7 percent average annual change 

(2.2 percent per year compound rate). For the subset of private sector workers in 

management, professional and related occupations, the cumulative earnings increase for 

2004 through 2014 was 32.5 percent, equivalent to a 2.6 percent average yearly percent 

change. The Department has never before doubled the salary levels for exemption in a 

single rulemaking, let alone increasing the salary levels by 113 percent. Applying the 

4.25 percent annual median increase for 12 years (2004 to 2016, when the final rule is 

expected to issue) results in a salary level of $687 per week ($35, 727 annually). 98 

5. Employment Cost Index 

As discussed above, the BLS Employment Cost Index data from BLS shows that 

for 2004 through 2014, earnings for all wage and salary workers increased at an average 

rate of2.2 percent per year. Earnings for private sector workers in management, 

professional and related occupations increased at a 2.6 percent yearly average. Applying 

98 Calculated as an average annual change, not a compound growth rate. 

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these average changes growth rates for each of 12 years (2004 to 20 16) to the current 

salary level of $455 per week ($23,660 annually) would result in an updated salary level 

ofbetween $590.78 per week ($30,720.30 annually) and $619.13 per week ($32, 194.60). 

6. Comparing state law minimums 

The Department should also consider the minimum salary levels required for 

exemption under State law. Just like the minimum wage, States may set higher standards 

for exemptions from state overtime requirements. In New York, the minimum salary 

level for exemption is $34,124 (increasing to $35,100 in 2016). 99 In California, the 

minimum salary level is currently $37,440 annually (increasing to $41,600 in 2016). 100 

Thus, the Department's proposed salary level of$50,440 is $8,840 higher than the salary 

level that will be required for exemption in California in 2016 and $15,340 higher than 

the salary level that will be required for exemption in New York in 2016. 

7. Comparing salary levels for exempt federal employees 

Historically, the Department has also looked to salaries paid to exempt employees 

of the federal government. In 1949, for example, the Department stated, "One important 

guide in determining at what point an employee should be considered an administrative 

employee rather than a clerk is to be found in the practice of the Government itself." 101 

At that time (in the clerical, administrative and fiscal group), the federal government had 

reserved grades 1 to 6 for clerical employees, grades 7 to 14 for administrative 

employers, and grades 15 and 16 for executive employees. 102 In determining an 

appropriate salary level, the Department looked to average salary for grades 6 and 7. 103 

Not much seems to have changed in this regard. On its web page, the federal 

Office of Personnel Management explains: 

The General Schedule has 15 grades- GS-1 (lowest) to GS-15 (highest). 

Agencies establish (classify) the grade of each job based on the level of 

difficulty, responsibility, and qualifications required. Individuals with a 

high school diploma and no additional experience typically qualify for 

GS-2 positions; those with a Bachelor's degree for GS-5 positions; and 

those with a Master's degree for GS-9 positions. 104 

99 12 NYCRR § 142-2.14. 

100 Cal. Lab. Code§ 515(a). 101 1940 Stein Report at 30-31. 

102 Jd 

1o3 Id 

104 See https;//www.opm.gov/po1icy-data-oversight!pay-leave/pay-systems/genera1-schedule/. 

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Although some employees holding Bachelor's degrees do not perform the duties required 

for the Part 541 exemptions, federal employees with Master's degree are unlikely to be 

classified as non-exempt. Thus, the dividing line between exempt and non-exempt 

federal employees is most likely at GS-7, the mid-point between GS-5 where some 

employees may perform exempt duties and GS-9 where most federal employees likely 

are exempt. As shown in Appendix D, the salary at GS-7, Step 1 for 2015 is $34,622; 

GS-7 Step 5 is $39,282; and GS-7 Step 6 is $40,437. Federal employees with Master's 

degrees start in GS-9, Step !at $42,399. 

E. THE DEPARTMENT'S PROPOSED $50,440 SALARY LEVEL Is PARTICULARLY 

INAPPROPRIATE FOR THE NON-PROFIT, GOVERNMENT AND HEALTHCARE 

SECTORS WHICH CANNOT INCREASE PRICES TO OFFSET COSTS 

Employee advocates often argue that the increased costs of a higher minimum 

wage or paying additional overtime can be offset by simply raising prices. These 

advocates, and the Department, fail to consider the impact of a $50,440 salary level on 

sectors that cannot raise prices. Non-profits, for example, primarily rely on private 

donations and government grants for their revenues. State and local governments rely on 

taxes that can be increased only through elections or legislation (and not very easily). 

Many employers in the healthcare industry depend on reimbursements from Medicaid, 

Medicare and private insurance- which will not increase just because the Department 

raises the salary level for exempt employees. Thus, none of these sectors can raise prices 

to increase the revenue needed to absorb the costs of a 113 percent increase to the salary 

level. The only option for non-profit, government and healthcare employers is to reduce 

services by decreasing headcount and hours worked. For healthcare employers, however, 

reducing services often is not an option either because of laws requiring a minimum level 

of service. Thus, employers in these sectors will face significant hardships and the 

people who rely on their operations will be forced to go without these services. 

As of September 2, 2015, almost 200 commenters have posted comments at 

www.regulations.gov expressing concerns regarding the impact of the proposed salary 

level increase on non-profits. Perhaps this was the motivation for Administrator David 

Weil's recent blog post, "Non-Profits and the Proposed Overtime Rule," which attempts 

to assure non-profits organizations that they "are not covered enterprises under the FLSA, 

however, unless they engage in ordinary commercial activities that result in sales made or 

business" of $500,000 or more per year. 105 Few non-profit organizations are likely to be 

fooled into believing they need not comply with the FLSA or can ignore the 

Department's changes to the Part 541 regulations. As acknowledged in the blog, the 

FLSA minimum wage and overtime requirements also apply to any employee of a nonprofit organization who makes out-of-state phone calls, mails information or conducts 

business via the U.S. mail, orders or receives goods from an out-of-state supplier (e.g., 

105 See http:/lblog.dol.gov/2015/08/26/non-profits-and-the-proposed-overtime-rule/. 

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ordering from Amazon.com), handles credit card transactions, or performs the accounting 

or bookkeeping for any of these activities. The Department has stated that it "will not 

assert individual coverage for employees who perform this type of work only on 

occasion, and for an insubstantial amount of time." But that is scant protection in a 

modem world dominated by interstate commerce activities via the internet. Further, a 

commitment by the Department not to enforce does not prohibit employees from bringing 

private collective action lawsuits. 

F. THE DEPARTMENT'S PROPOSAL TO CREDIT NON-DISCRETIONARY BONUSES 

TOWARDS THE SALARY REQUIREMENT IS NOTHING MORE THAN A RUSE 

The Department also seeks comments on whether "to permit nondiscretionary 

bonuses and incentive payments to count towards partial satisfaction of the salary level 

test." 106 Specifically, the Department proposes to allow employers to satisfy up to I 0 

percent of the standard weekly salary level with nondiscretionary bonus payments paid 

out monthly or less frequently. 107 Although the Chamber supports allowing bonuses to 

count toward the salary requirements, the Department's proposal so limits when such 

credits could be taken that very few of our members would benefit or benefit in a manner 

sufficient to offset added administrative costs. 

First, bonuses are generally not paid on a monthly or less frequent basis. 

Providing exempt employees with quarterly and annual bonuses, however, is the more 

common way bonuses are paid. Thus, we ask the Department to allow credit for all 

nondiscretionary bonuses regardless of the frequency of payment. 

Second, the Department should also clarify the meaning of the term 

"nondiscretionary" bonus. We suggest adopting the FLSA regulation at 29 C.F.R. 

§ 778.21l(b) providing that a bonus is nondiscretionary unless the employer "retains 

discretion both as to the fact of payment and as to the amount until a time quite close to 

the end of the period for which the bonus is paid." Examination of the WHO's 

enforcement database will no doubt establish that many employers err when calculating 

the regular rate. The confusion will be exacerbated if the Department adopts different 

definitions of discretionary versus nondiscretionary bonuses for exempt versus nonexempt employees. 

Third, the Department should allow employers to take credit for all types of 

compensation includable in the regular rate of pay under 29 U.S.C. § 207(e)- including 

commissions, per diem payments and car allowances that are not reimbursements for 

106 2015 NPRM at 38536. 

107 !d. at 38535-36. 

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business expenses, and profit-sharing payments under plans that do not meet the 

requirements of29 C.F.R. Part 549. 108 

Fourth, unless the Department reconsiders its proposed $50,440 salary level, a 

limit of 10 percent (or, $5,044) is too low to provide any relief or make the additional 

administrative burdens worth the effort. 

Finally, without the opportunity for make-up payments as under the highly 

compensated test, the Department's proposal would be very difficult to implement. 

G. WITHOUT A PRO-RATA PROVISION, THE DEPARTMENT'S NEW SALARY 

LEVEL WILL INTERFERE WITH PART TIME PROFESSIONAL POSITIONS 

The Department's proposed minimum salary level is so high that it would 

effectively prevent many current part time professionals from maintaining their positions. 

One solution to this, other than reducing the salary level significantly, would be to 

provide a pro-rated salary level so that part time professionals would be able to take 

advantage of the flexibility and benefits they have come to enjoy. 

Under the current regulations, an employee who performs tasks that clearly meet 

one or more of the exemption duties tests can be classified as exempt so long as his or her 

salary exceeds $23,660 per year. Thus, a part-time employee working a 50 percent 

schedule can qualify as exempt so long as he or she works in a position that has a full 

time salary of approximately $48,000 per year. This is true not because the full-time 

equivalent salary is $48,000, but because the part-time salary of $24,000 is still in excess 

of the regulated minimum. 

Under the Department's proposed minimum salary level, that employee would no 

longer qualify for exemption. Instead, that employee working a 50 percent schedule 

would need to be working in a position earning more than $100,000 on a full-time basis. 

Without a pro rata provision, the number of employees who will be eligible for part-time 

exempt employment will be significantly limited. This limitation will have a 

disproportionate impact on women in the workplace, and, in particular, likely will impact 

mothers who may be seeking to re-enter the workplace as professionals, but not on a fulltime basis. Similarly, older workers looking to pursue a phased retirement would likely 

be disadvantaged by the Department's increased minimum salary level. 

108 The Department's assumption that only sales employees earn commissions, 2015 NPRM at 38536, 

reveals a lack of understanding regarding compensation plans in the private sector. Many exempt 

employees who perform little direct sales work share commissions: A branch manager in a real estate 

brokerage often shares the commissions for homes sold by the agents working in the branch. Commission 

sharing is prevalent in the insurance industry, where a manager who provides a junior agent with training 

and marketing consulting can be entitled to part of the commission. Also, it is common in the retail industry 

for store managers and assistant managers to receive compensation based on a percentage of sales or profits 

in the store. 

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If the Department permitted the salary to be pro-rated, however, employers would 

be far more likely to allow such arrangements. We therefore urge the Department to add 

a pro-rata provision to the regulations, regardless of the salary level ultimately adopted in 

a final rule. 

H. IF THE DEPARTMENT MOVES FORWARD WITH A 113 PERCENT INCREASE TO 

THE SALARY LEVEL, THE DEPARTMENT SHOULD PROVIDE A ONE-YEAR 

EFFECTIVE DATE AND PHASE IN THE SALARY INCREASE OVER FIVE YEARS 

The Department has proposed a 113 percent increase to the standard salary level, 

which is unprecedented in the 77-year history of the white collar exemptions. Unless the 

Department lowers the salary level in the final regulations, employers will need a 

significant period of time to comply with the new requirements- even more time if the 

Department also moves forward with changes to the duties tests for exemption. 

Employers will need to familiarize themselves with the final regulation, analyze 

their workforce, and determine how to comply. This process will require employers to 

identify all exempt employees earning a salary less than the new required level; evaluate 

whether to comply by providing a salary increase or reclassifying some or all of such 

employees to non-exempt; decide whether to pay reclassified employees on an hourly or 

salaried basis; and draft new compensation plans for reclassified employees. Employers 

will also need to evaluate: whether they need to limit the hours employees work; whether 

they can still afford to pay bonuses; what adjustments are necessary to benefit plans; and 

how they will set the new hourly rates or salaries. Finally, employers will need time to 

communicate the changes to employees and implement the changes. 

Thus, the Chamber requests that regardless of what new salary level the 

Department chooses, it set an effective date for one year after publication of the final 

rule, as it did for the revisions to the companionship services exemption regulation. 

Additionally, if the proposed salary level is finalized, the Department should 

phase in the salary increase over five years, raising the salary level by approximately 22 

percent per year. This would be similar to the way minimum wage increases- involving 

a much lower percentage change and not requiring extensive evaluation and 

reclassification processes -have been implemented. By phasing in the salary increase, 

employers would know well in advance what the salary level would be and be able to 

better prepare their budgets. Even with such a phase-in, the salary increases required 

would be unprecedented in the private sector. According to the BLS Employment Cost 

Index, 12-month percent change data, private sector wages and salaries have only 

increased between 1.6 percent and 2.8 percent annually over the last decade. 

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II. THE DEPARTMENT SHOULD ABANDON ITS PROPOSAL TO INCREASE 

THE SALARY LEVEL FOR THE HIGHLY COMPENSATED TEST 

The Department's proposal to increase the total annual compensation required 

under the highly compensated test at the 90th percentile of all non-hourly paid employees 

(estimated at about $122,000) suffers from the same flaws as described above and in 

section VI for the standard salary level. The Department should set the highly 

compensated test using actual salary levels of exempt employees working in the South 

and in the retail sector that would meet the highly compensated exemption requirements. 

Here, too, study of wages paid to federal employees who inevitably qualify for the FLSA 

white collar exemptions is instructive. In the 2015 federal General Schedule, only the 

three highest of 150 pay bands would qualify as highly compensated under the 

Department's proposal: grade IS, step 8 ($125,346); grade 15, step 9 ($128,734); and 

grade 15, step 10 ($132,122). 109 

These employees have come to expect to have the flexibility and other benefits of 

a salaried position. In many cases, they have college or other higher education degrees. 

For them to be reclassified, so that they will have no greater status or benefits than 

someone with far less education and experience, will be tremendously disruptive and 

dispiriting. Furthermore, employers may be inclined to try and reclassify these 

employees as exempt under one of the standard duties tests which will create 

enforcement and litigation risks. This is a change in search of a problem- the 

Department should not finalize this salary increase. 

III. THE DEPARTMENT'S PROPOSAL FOR AUTOMATIC ANNUAL SALARY 

LEVEL INCREASES IS CONTRARY TO CONGRESSIONAL INTENT, 

VIOLATES THE ADMINISTRATIVE PROCEDURE ACT, IGNORES 77 

YEARS OF REGULATORY HISTORY, WILL HAVE A RATCHETING 

EFFECT, AND WOULD IMPOSE SIGNIFICANT ADDITONAL BURDENS 

ON EMPLOYERS 

Automatic annual increases to the salary levels is a tremendous concern as it 

ensures the business community will never again be allowed to participate in a public 

debate regarding the salary levels. The Department's proposal for automatic salary level 

increases raises significant issues regarding the Department's authority and responsibility 

under section 13(a)(J) of the FLSA- questions that could mire this rulemaking in 

litigation. The Chamber suggests that the Department abandon this proposal. 

109 The federal government also provides locality pay for employees in some metropolitan areas to off-set 

the high cost of living in these urban areas. But as discussed above, historically, the Department has set 

salary levels looking to salaries earned by exempt employees in smaller communities and lower wage 

regions. Thus, the Department cannot justify using the 28.72 percent locality pay adjustment for New York, 

for example, or the 35.15 percent adjustment for San Francisco. 

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First, there is no evidence that Congress intended that the salary level test for 

exemption under section 13(a)(l) be indexed. In the 77-year history of the FLSA, 

Congress has never provided for automatic increases of the minimum wage, although 

state minimum wages are sometimes indexed. Nor has Congress indexed the minimum 

hourly wage for exempt computer employees under section 13(a)(l7) of the Act, the tip 

credit wage under section 3(m) or any of the subminimum wages available in the Act. 

Although Congress has provided indexing under other statutes, it has never done so under 

the FLSA. 

Second, the regulatory history of Part 541 provides no precedent for indexing. 

Public commenters have suggested automatic updates to the salary levels in at least two 

past rulemakings. In 1970, for example, a "union representative recommended an 

automatic salary review" based on an annual BLS survey, the National Survey of 

Professional, Administrative, Technical, and Clerical Pay. 110 The Department quickly 

dismissed the idea as "needing further study," although stating that the suggestion 

"appear[ ed] to have some merit particularly since past practice has indicated that 

approximately 7 years elapse between amendment ofthese salary requirements." 111 

However, the "further study" came in 2004, after 29 years had elapsed between salary 

increases. Nonetheless, in 2004, the Department rejected indexing as contrary to 

congressional intent, disproportionately impacting lower-wage geographic regions and 

industries, and because the Department intended to do its job: 

[S]ome commenters ask the Department to provide for future automatic 

increases of the salary levels tied to some inflationary measure, the 

minimum wage or prevailing wages. Other commenters suggest that the 

Department provide some mechanism for regular review or updates at a 

fixed interval, such as every five years. Commenters who made these 

suggestions are concerned that the Department will let another 29 years 

pass before the salary levels are again increased. The Department intends 

in the future to update the salary levels on a more regular basis, as it did 

prior to 1975, and believes that a 29-year delay is unlikely to reoccur. The 

salary levels should be adjusted when wage survey data and other policy 

concerns support such a change. Further, the Department finds nothing in 

the legislative or regulatory history that would support indexing or 

automatic increases. Although an automatic indexing mechanism has 

been adopted under some other statutes, Congress has not adopted 

indexing for the Fair Labor Standards Act. In 1990, Congress modified 

the FLSA to exempt certain computer employees paid an hourly wage of 

at least 6.5 times the minimum wage, but this standard lasted only until 

the next minimum wage increase six years later. In 1996, Congress froze 

110 35 FR 883, 884 (Jan. 22, 1970). 

Ill Id 

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the minimum hourly wage for the computer exemption at $27.63 (6.5 

times the 1990 minimum wage of$4.25 an hour). In addition, as noted 

above, the Department has repeatedly rejected requests to mechanically 

rely on inflationary measures when setting the salary levels in the past 

because of concerns regarding the impact on lower wage geographic 

regions and industries. This reasoning applies equally when considering 

automatic increases to the salary levels. The Department believes that 

adopting such approaches in this rulemaking is both contrary to 

congressional intent and inappropriate. 112 

Now, the Department seems to be admitting that it is incapable of doing its job: 

This history underscores the difficulty in maintaining an up-to-date and 

effective salary level test, despite the Department's best intentions. 

Competing regulatory priorities, overall agency workload, and the timeintensive nature of notice and comment rulemaking have all contributed to 

the Department's difficulty in updating the salary level test as frequently 

as necessary to reflect changes in workers' salaries. These impediments 

are exacerbated because unlike most regulations, which can remain both 

unchanged and forceful for many years if not decades, in order for the 

salary level test to be effective, frequent updates are imperative to keep 

pace with changing employee salary levels. Confronted with this 

regulatory landscape, the Department believes automatic updating is the 

most viable and efficient way to ensure that the standard salary level test 

and the HCE total annual compensation requirement remain current and 

can serve their intended function of helping differentiate between white 

collar workers who are overtime-eligible and those who are not. 113 

The Department also states that automatic annual increases to the salary will 

"promote government efficiency by removing the need to continually revisit this issue 

through resource-intensive notice and comment rulemaking." 114 

The Department seems to be missing the point of the Administrative Procedure 

Act ("APA"): Congress intended rulemaking to be "resource-intensive," and section 

13(a)(l)'s directive to the Department to define and delimit the white collar regulations 

"from time to time" seems fairly unambiguous; Congress wants the Department to 

"continually revisit" the Part 541 regulations. There is no indication that Congress 

wanted to put these regulations on auto-pilot. 

112 2004 Final Rule at 22171-72. 

m 2015 NPRM at 38539. 

114 Id at 38537. 

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The Department argues that Congress' failure to provide "guidance either 

supporting or prohibiting automatic updating" indicates it has authority to do so. 

However, equally plausible is the assumption that Congress felt no need to act because: 

(!)the Department, in the 77-year history ofthe FLSA, has never seriously considered 

indexing the salary level; (2) in 2004, the Department concluded that indexing would 

violate congressional intent; and (3) Congress' failure to ever index anything under the 

FLSA is sufficient guidance. 

The Department also now states that the 2004 Final Rule "did not discuss the 

Department's authority to promulgate such an approach through notice and comment 

rulemaking." 115 In 2004, the Department concluded that indexing the salary level is 

"contrary to congressional intent." Once concluding that Congress did not give the 

Department authority to provide automatic increases to the salary level, the subject was 

closed; the Department could not then proceed to adopt indexing through the regulatory 

process. The Department provides no explanation of why its views on congressional 

intent have changed, and the Chamber is unaware of any legislative or legal development 

that would justify such a reversal. 

Notice and comment rule making has achieved the purpose of the AP A by 

ensuring vigorous public debate about the salary levels, including submission of salary 

information in public comments. The regulatory history shows that the Department has 

adjusted its proposals based on public comment. Proposed salary levels have been 

increased and decreased in the final regulations. For example, in 2004, in response to the 

public comments, the Department increased its proposed standard salary level from $425 

per week to $455 per week, and the annual compensation for the highly compensated test 

from $65,000 to $100,000. The Department's proposal for automatic salary increases 

would end this public debate forever. 

Similarly, the Department's proposed methodology for determining the amount of 

the annual increase is not well thought out. Particularly troubling is the proposal to reset 

the salary level every year using a "fixed percentile" pulling the flawed CPS data, yearafter-year, to determine the 40th percentile of full-time, non-hourly paid earnings. 116 The 

Department seems to favor this approach, but has apparently missed a huge problem: An 

index that recalibrates the 40th percentile, each year, based on salaries of non-hourly paid 

employees will be relying on an ever shrinking pool of such employees, causing an never 

ending, upward ratcheting effect. In response to the final rule, employers may give a 

salary increase to some exempt employees already near $50,440. However, employers 

will need to reclassify millions of other employees to non-exempt status. Although nonexempt employees may be paid on a salary, a significant percentage of reclassified 

employees will be converted to hourly pay. Consequently, the lowest paid salary 

m 2015 NPRM at 38537. 

116 2015 NPRM at 38540. 

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employees are likely to leave those ranks. As a result, the 40th percentile of employees 

remaining in the data set will correspond to a higher salary level, which will further 

reduce the number who meet the salary threshold. The following year that will increase 

even further the salary corresponding to the 40th percentile, etc. The result will be that 

tomorrow's 40th percentile and its salary level will be an even poorer proxy for the actual 

work performed by exempt employees because the measure itself will drive the outcome. 

In a recent analysis, Edgeworth Economics illustrates how quickly the minimum 

salary level for exemption will increase: "If just one quarter of the full-time nonhourly 

workers earning less than $49,400 per year ($950 per week) were re-classified as hourly 

workers, the pay distribution among the remaining nonhourly workers would shift so that 

the 40th percentile of the 2016 pay distribution would be $54,184 ($1 ,042 per week), 

about 9.6 percent higher than it was in 2015." 117 This process would repeat each year as 

the lowest paid nonhourly workers fail the salary test and are re-classified as non-exempt 

hourly workers. After five years, as shown in the following charts from Edgeworth 

Economics, even in the absence of inflation, "the new 40th percentile of the nonhourly 

pay distribution would be $72,436 ($1 ,393 per week), which is about 46.6 percent more 

than the minimum salary threshold in 2015. 118 

This upward ratcheting "becomes more pronounced if more nonhourly workers 

who failed the salary test are re-classified into hourly positions each year." 119 For 

example, if half of the reclassified employees are paid hourly, the 40th percentile "will 

increase by 19.9 percent in the first year and by 94 percent over a five year period. This 

means that a salary threshold of$49,400 ($950 per week) in 2015 would increase to 

$95,836 ($1,843 per week) by 2020, eyen in the absence of inflation." 120 

In addition to the rulemaking and precedential issues, adopting the consumer price 

index as the measure for increasing the salary threshold would also be problematic as 

prices and salaries are related only in the long run. Year-to-year there have been wide 

differences in their rates of increase and shifts in job duties are more closely correlated 

with wages than prices. 

111 "Indexing the White Collar Salary Test: A Look at the DOL's Proposal," Edgeworth Economics (Aug. 

27, 2015), available at http://www.edgewortheconomics.com/experience-and-news/edgewordsblogs/ edgewords-business-analytics-and-regulation/article:OS-27-20 15-12-00am-indexi ng-the-wh ite-co llarsalary-test-a-look-at-the-dol-s-proposal/ 

118 1d 

119 Jd 

120 ld 

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Test is the 40th 

The Department also fails to consider the impact of automatic increases during a 

future economic downturn. Employers will be denied the option of lowering salaries to 

quickly respond to decreased revenue experienced in bad economic times. Both of the 

proposed methodologies for setting the new salary levels will be slow to reflect actual 

economic conditions. Implementing automatic increases in the salary threshold, by 

whichever methodology, will guarantee increases at precisely the wrong times for 

employers and employees. If the Department wishes to cement a legacy of negatively 

impacting future employers, there could hardly be a better way. 

Annual increases to the salary level would impose significant additional burdens 

on employers for no better reason than the Department's view that notice-and-comment 

rulemaking is difficult. The Department proposes automatic increases annually, 

providing employers only 60 days' notice of the new salary level. Employers need much 

more lead time to adjust to an increased salary level. First of all, unlike the federal 

government, private employers operate on any number of different fiscal years. 

Budgeting for the next fiscal year can begin six months or more before year end. For 

most companies, labor costs are a large component of the budget. The inability to 

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determine increases in labor costs until the Department issues a notice, which may or 

may not be timely for a company's budget cycle, could cause financial chaos. Businesses 

will have to escrow funds, delay capital expenditures, implement hiring freezes, etc., until 

the Department's notice is released and they can determine the impact of the salary 

increase. 

Also, Chamber members have reported that reclassifying employees from exempt 

to non-exempt can take up to six months. The annual salary increase proposed by the 

Department will require an employer to: Analyze whether business conditions allow a 

salary increase or whether they need to reclassify employees as non-exempt; prepare new 

compensation plans for reclassified employees; develop materials to explain the 

reclassification to employees; review timekeeping and payroll systems to ensure 

compliance with the FLSA recordkeeping requirements and compliant overtime 

calculations; review or adopt new policies for the reclassified employees, including 

policies prohibiting off-the-clock work, when employees will be permitted to work 

overtime, payment for waiting time, training time and travel time, etc.; train the 

reclassified employees, and the managers who supervise them on recording time and 

other wage-hour topics. Ifthe salary change is implemented as proposed, a large number 

of workers will have to be added to timekeeping systems. This may require server and 

system upgrades to account for the additional users. Best practices take time. 

The Department contends that employers can increase their lead time by simply 

accessing a quarterly publication issue by BLS of the deciles of weekly wages of fulltime salaried workers. This assumes the employer is familiar with the white collar 

regulations, knows how to get to the correct publication on the BLS website and, indeed, 

is familiar enough with the Department's process to know the level that will be chosen. 

Indeed even if all these conditions are met, there may still be differences between the 

level identified in a given BLS quarterly publication because of internal company 

requirements and the level used by DOL several months later. 

IV. THE DEPARTMENT SHOULD NOT MAKE ANY CHANGES TO THE 

DUTIES TESTS 

A. THE DEPARTMENT IS PRECLUDED BY THE ADMINISTRATIVE PROCEDURE 

ACT FROM MAKING ANY CHANGES TO THE DUTIES TESTS 

While we accept that some increase to the salary level will ultimately result from 

this rulemaking, based upon the NPRM, changes to the duties test are unsupportable. 

Despite the Department's decision to focus solely on the salary level in its NPRM, it has 

not foreclosed the possibility of changes to the duties test. Indeed, without identifying 

any changes to the regulatory text or a specific proposal, the Department indicates 

modifications to the duties test remain under consideration. However, by declining to 

make "specific proposals to modify the standard duties test," the Department has wholly 

failed to provide commenters with adequate notice of any changes that may be made. 

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The expansive list of questions posed by the Department on the current duties test 

-which range from the broad "[ w ]hat, if any, changes should be made to the duties 

test?," to the specific "[s]hould the the Department look to the State of California's law 

(requiring that 50 percent of an employee's time be spent exclusively on work that is the 

employee's primary duty) as a model?"- is insufficient to allow stakeholders a 

meaningful opportunity to comment on proposed regulatory changes. Simply inviting 

comment on a series of questions in the preamble appears to be a deliberate attempt to 

avoid the Department's obligations set forth by the Administrative Procedure Act, and 

certainly violates the spirit of the AP A. The public should not be left to guess at an 

agency's intentions, particularly on a subject that has such widespread impact upon 

America's workforce- such as any change to the "white collar" exemption duties 

requirements. 121 Put differently, stakeholders cannot be asked to "divine" the agency's 

"unspoken thoughts." 122 However, that is precisely what the Department now asks us to 

do. Indeed, in an email to the publication Law360, the Department flouted its intentions 

to construe its obligations under the APA in the narrowest way possible: 

The DOL said in an email ... that "while no specific changes are 

proposed for the duties tests, the NPRM contains a detailed discussion of 

concerns with the current duties tests and seeks comments on specific 

questions regarding possible changes. The Administrative Procedure Act 

does not require agencies to include proposed regulatory text and permits 

a discussion of issues instead." 123 

The Department's questions- without corresponding regulatory text- have 

utterly deprived the public of a meaningful role in this rulemaking. Any changes to the 

well-entrenched duties test will result in the upheaval of the past decade of case law and 

agency opinions and would be done without providing any substantive notice to the 

regulated community. 124 While the Department may attempt to bootstrap any changes to 

the duties test to cherry-picked comments, this would not shield the final rule from 

challenge. As the D.C. Circuit has held, the "fact that some commenters actually 

submitted comments" addressing the final rule "is of little significance," because 

"[c]ommenting parties cannot be expected to monitor all other comments submitted to an 

121 See CSXTransp., Inc. v. Surface Transp. Bd., 584 F.3d 1076, 1082 (D.C. Cir. 2009) (finding that 

commenters could not have anticipated which "particular aspects of[the agency's] proposal [were] open 

for consideration."). 

122 Arizona Public Serv. Co. v. EPA, 211 F.3d 1280 (D.C. Cir. 2000) (citation omitted). 123 "Final OT Rule May Go Beyond Salary Hike, Lawyers Say," Law360 (June 30, 2015), attached as 

Appendix E. 

124 See, e.g., Prometheus Radio Project v. FCC, 652 F.3d 431, 450 (3d Cir. 20ll)(holding that final rule 

was not a logical outgrowth of"open-ended" questions that failed to describe what the agency was 

"considering or why"). 

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agency." 125 Instead, the Department must "itself provide notice of a regulatory 

proposal," but has failed to do so. 126 

Should any changes to the duties test result from this rulemaking, the final rule 

also would fail to comply with Executive Orders 12866 and 13563, which require 

agencies, in promulgating regulations, to assess all costs and benefits of available 

regulatory alternatives. 127 In particular, an agency must consider the costs of 

enforcement and compliance prior to implementing regulations. 128 Because the 

Department has declined to proffer any specific proposal, the Department has not made 

any attempt to identify or quantify the costs that the regulated community will most 

certainly face. Stakeholders are left without the opportunity to evaluate the Department's 

estimates of the costs and benefits of any changes to the duties tests -as no such costs 

and benefits have been discussed. Thus, the requirements as set forth in Executive 

Orders 12866 and 13563 have not been met. 

Executive Order 13563 also requires that regulations be adopted through a 

process that sufficiently involves public participation. 129 Specifically, Executive Order 

13563 requires that an agency afford the public a "meaningful opportunity to comment 

through the Internet on any proposed regulation, with a comment period that should 

generally be at least 60 days." 130 In addition, Executive Order 13563 requires an agency, 

before issuing a notice of proposed rulemaking, to seek the views of those who are likely 

to be affected by such rulemaking. 131 The amorphous topics upon which the Department 

seeks comments through the current NPRM deprive stakeholders of this meaningful 

opportunity to express their views. The Chamber believes that should the Department 

seek changes to the Part 541 duties requirements, it would necessarily have to first notice 

the specific proposals being considered and the costs and benefits associated with the 

changes- and then provide the public with a meaningful opportunity to comment. 

The importance of allowing the public to comment on specific changes to 

regulatory text can be found in the regulatory history of Part 541 itself. In the 2004 

rulemaking, for example, the AFL-CIO objected to the Department's proposal to change 

the word from "whose" to "a" as significantly expanding the scope of the exemptions. 

Because that was not the intended result, the Department did not implement the change: 

125 Fertilizer Jnst. v. EPA, 935 F.2d 1303, 1312 (D.C. Cir. 1991) (an agency cannot "bootstrap notice from a 

comment") (citations omitted). 

'" Id 127 58 FR 51735 (Oct. 4, 1993); 76 FR 3821-23 (Jan. 21, 2011). 

128 58 FR 51735 (Oct. 4, 1993). 

129 76 FR 3821-22 (Jan. 21, 2011). 

130 76 FR 3821-22 (Jan. 21, 2011) (emphasis supplied). 

"' Id at 3822. 

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This change was made in response to several commenters, such as the 

AFL-CIO, who felt that the change from "whose" primary duty as written 

in the existing regulations to "a" primary duty as written in the proposal 

weakened this prong of the test by allowing for more than one primary 

duty and not requiring that the most important duty be management. As 

the Department did not intend any substantive change to the concept that 

an employee can only have one primary duty, the final rule uses the 

introductory. 132 

Thus, as the AFL-CIO acknowledged in 2004, words matter and even minor 

changes to seemingly innocuous words can have a significant, even if inadvertent, impact 

on the scope of the exemption. 

Finally, if any changes to the regulatory text of the Part 541 duties tests are 

adopted in a final rule, the Department will be ignoring President Obama's "Open 

Government Initiative" issued on January 21, 2009, just one day after his inauguration, 

stated: 

My Administration is committed to creating an unprecedented level of 

openness in Government. We will work together to ensure the public trust 

and establishment of a system of transparency, public participation, and 

collaboration. 133 

Refusing to allow public comment on specific changes to the regulatory text 

contradicts President Obama's commitment to transparency, public participation and 

collaboration. Before making any changes to the duties tests (similarly, before finalizing 

the methodology for any automatic salary increases), the Department should publish the 

specific changes to the regulatory text in a Notice of Proposed Rulemaking, and thus 

provide the public with a meaningful opportunity to participate and collaborate by filing 

comments on the proposed text. 

B. DEFINITION OF PRIMARY DUTY 

The Chamber opposes any revision to the duties test that introduces a quantitative 

requirement whether made in reversion to a long/short duties test or otherwise. Such a 

change would upend the regulated community, adding substantial unjustified (and 

unexplored) costs and burdens on employers, and only serve to increase litigation. In its 

NPRM, the Department now looks to potentially nullify the established primary duties 

requirements contained in Part 541 by inquiring whether employees should be required to 

spend a specified minimum amount of time exclusively performing their primary duty in 

132 2004 Final Rule at 22 131. 

m See https://www.whitehouse.gov/open. 

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order to qualify as exempt, citing California's 50 percent primary duty requirement as an 

example. 134 

The Department's reference to California's 50 percent primary duty rule is 

particularly troubling because that state has realized the unintended effect of its so-called 

"bright-line" rule. Rather than decreasing litigation and uncertainty over classifications, 

California's rule has had the opposite effect- substantial litigation, as members of the 

California plaintiffs' bar have come to realize (and capitalize on) the extreme difficulty 

employers face in proving the amount of time employees spend on exempt versus nonexempt tasks. Indeed, such a rule places an enormous burden on employers to engage in 

extensive analysis and time testing, wading through the hour-by-hour- and in some cases 

minute-by-minute -tasks of their employees in order to defend their classification 

decisions. In addition, how is an employer (and even the Department) supposed to 

accurately measure the amount of time that an employee spends thinking about a problem 

and creating a strategy for the solution? Unlike most non-exempt tasks, exempt 

responsibilities often occur outside of the workplace at any hour of the day. Regardless of 

any effort to regulate around such ambiguities, the central issue will always remain what 

is - and what is not- exempt work? 

The Department has already acknowledged that these precise concerns render 

quantitative testing impracticable. In 2004, responding to commenters who requested the 

addition of a quantitative test, the Department reasoned that such analysis unnecessarily 

adds complexity and burdens to exemption testing by, for example, requiring employers 

to "time-test managers for the duties they perform, hour-by-hour in a typical 

workweek". 135 • Requiring employers to "distinguish[] which specific activities were 

inherently a part of an employee's exempt work proved to be a subjective and difficult 

evaluative task that prompted contentious disputes." 136 Establishing quantitative 

requirements needlessly muddles a process the Department asserts through its NPRM 

should be streamlined. As the Department noted in 2004, "[i]t serves no productive 

interest if a complicated regulatory structure implementing a statutory directive means 

that few people can arrive at a correct conclusion, or that many people arrive at different 

conclusions, when trying to apply the standards to widely varying and diverse 

employment settings." 137 

The Preamble to the 2004 Final Rule identified further concerns with requiring a 

strict delineation of time spent on exempt and non-exempt duties: 

134 2015 NPRM at 38543. 

135 2004 Final Rule at 22126. 136 Jd at 22127. 

lJ7 !d. 

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For example, employers are not generally required to maintain any 

records of daily or weekly hours worked by exempt employees (see 29 

CFR 516.3), nor are they required to perform a moment-by-moment 

examination of an exempt employee's specific duties to establish that that 

an exemption is available. Yet reactivating the former strict percentage 

limitations on nonexempt work in the existing 'long' duties tests could 

impose significant new monitoring requirements (and, indirectly, new 

recordkeeping burdens) and require employers to conduct a detailed 

analysis of the substance of each particular employee's daily and weekly 

tasks in order to determine if an exemption applied. 138 

Rather than solve any of the perceived problems with the primary duty test, a 

quantitative requirement would only create tremendous recordkeeping burdens on 

employers and add to employers' uncertainty over classifications. Such a quantitative 

requirement merely serves to incentivize plaintiffs' attorneys to systematically attack an 

employee's classification. The only people who would benefit from adding such a 

provision would be the plaintiffs' attorneys and the attorneys defending the employers. 

The Chamber reminds the Department that, as part of its 2004 rulemaking, the 

Department evaluated- and rejected- prior proposals for a quantitative "bright-line" test 

such that California employs. Indeed, the Department warned: 

Adopting a strict 50-percent rule for the first time would 

not be appropriate . . . because of the difficulties of 

tracking the amount of time spent on exempt tasks. An 

inflexible 50-percent rule has the same flaws as an 

inflexible 20-percent rule. Such a rule would require 

employers to perform a moment-by-moment examination 

of an exempt employee's specific daily and weekly tasks, 

thus imposing significant new monitoring requirements 

(and, indirectly, new recordkeeping burdens). 139 

The Department's reasoned analysis conducted in 2004 still holds true in 2015. 

Rather than focusing on a quantitative test, the 2004 Final Rule instead chose to focus on 

four nonexclusive factors for determining the primary duty of the employee: 

(I) The relative importance of the exempt duties as 

compared with other types of duties; 

(2) The amount of time spent performing exempt work; 

138 /d. at 22126-27. 

139 !d. at 22186. 

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(3) The employee's relative freedom from direct 

supervision; and 

(4) The relationship between the employee's salary and 

the wages paid to other employees for the same 

kind of nonexempt work. 140 

Under these factors, the amount of time spent may be considered, but is not 

indicative alone of an exempt status. Indeed, the 2004 Final Rule emphasized that: 

The time spent performing exempt work has always been, 

and will continue to be, just one factor for determining 

primary duty. Spending more than 50 percent of the time 

performing exempt work has been, and will continue to be, 

indicative of exempt status. Spending less than 50 percent 

of the time performing exempt work has never been, and 

will not be, dispositive of nonexempt status . 

. . . [T]he search for an employee's primary duty is a 

search for the "character of the employee's job as a whole." 

Thus, both the current and final regulations "call for a 

holistic approach to determining an employee's primary 

duty," not "day-by-day scrutiny of the tasks of managerial 

or administrative employees." Counts v. South Carolina 

Electric & Gas Co., 317 F.3d 453,456 (4th Cir. 2003) 

("Nothing in the FLSA compels any particular time frame 

for determining an employee's primary duty"). 141 

The Chamber urges the Department to continue its application of the holistic 

approach developed in 2004 and summarily reject any requirement that duties must be 

measured. 

C. CONCURRENT DUTIES PROVISION SHOULD BE MAINTAINED 

The Department's proposal to eliminate or modifY the "concurrent duties" 

provision (that lets an exempt employee perform both exempt and non-exempt tasks 

without jeopardizing the executive exemption) also gives the Chamber great cause for 

concern. Currently, the regulations provide: 

Concurrent performance of exempt and nonexempt work does not 

disqualify an employee from the executive exemption if the 

requirements of§ 541.100 are otherwise met. Whether an 

140 29 C.F.R. § 541.700. 141 2004 Final Rule at 22126-27. 

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employee meets the requirements of§ 541.100 when the employee 

performs concurrent duties is determined on a case-by-case basis 

and based on the factors set forth in § 541.700 [related to primary 

duty test]. Generally, exempt executives make the decision . 

regarding when to perform nonexempt duties and remain 

responsible for the success or failure of business operations under 

their management while performing the nonexempt work. 142 

Section 541.1 06 allows exempt employees such as store or restaurant managers to 

perform duties that are non-exempt in nature while simultaneously acting in a managerial 

capacity. If this "concurrent duties" provision is eliminated, it could mean the wholesale 

loss of the executive exemption for both assistant store managers and store managers, 

particularly in smaller establishments. Indeed, the Department has already noted in the 

NPRM that it has heard from concerned stakeholders in the retail and hospitality industry 

who stressed that "the ability of a store or restaurant manager or assistant manager to 

'pitch in' and help line employees when needed" is a crucial aspect of their 

organizations' management culture and "necessary to enhancing the customer 

experience." 143 

Moreover, as it did with the primary duties test, the Department has already 

evaluated and resolved this issue in its 2004 rulemaking: 

The Department believes that the proposed and final 

regulations are consistent with current case law which 

makes clear that the performance of both exempt and 

nonexempt duties concurrently or simultaneously does not 

preclude an employee from qualifying for the executive 

exemption. Numerous courts have determined that an 

employee can have a primary duty of management while 

concurrently performing nonexempt duties. See, e.g., Jones 

v. Virginia Oil Co., 2003 WL 21699882, at *4 (4th Cir. 

2003) (assistant manager who spent 75 to 80 percent of her 

time performing basic line-worker tasks held exempt 

because she "could simultaneously perform many of her 

management tasks"); Murray v. Stuckey's, Inc., 939 F.2d 

614, 617-20 (8th Cir. 1991) (store managers who spend 65 

to 90 percent of their time on "routine non-management 

jobs such as pumping gas, mowing the grass, waiting on 

customers and stocking shelves" were exempt executives); 

Donovan v. Burger King Corp., 672 F.2d 221,226 (1st 

142 29 C.P.R. 541.106. 

143 2015 NPRM at 38521. 

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Cir. 1982) ("an employee can manage while performing 

other work," and "this other work does not negate the 

conclusion that his primary duty is management"); Horne 

v. Crown Central Petroleum, Inc., 775 F. Supp. 189, 190 

(D.S.C. 1991) (convenience store manager held exempt 

even though she performed management duties 

"simultaneously with assisting the store clerks in waiting 

on customers"). Moreover, courts have noted that exempt 

executives generally remain responsible for the success or 

failure of business operations under their management 

while performing the nonexempt work. See Jones v. 

Virginia Oil Co., 2003 WL 21699882, at *4 ("Jones" 

managerial functions were critical to the success' of the 

business); Donovan v. Burger King Corp., 675 F.2d 516, 

521 (2nd Cir. 1982) (the employees' managerial 

responsibilities were "most important or critical to the 

success of the restaurant"); Horne v. Crown Central 

Petroleum, Inc., 775 F. Supp. at 191 (nonexempt tasks 

were "not nearly as crucial to the store's success as were 

the management functions"). 144 

ln 2004, the Department reviewed the case law cited above and stated that it 

believed these cases accurately reflected the appropriate test of exempt executive status 

and was a "practical approach that could be realistically applied in the modern workforce, 

particularly in restaurant and retail settings." 145 Nothing has changed since 2004 to 

disturb the conclusion that the regulation "has sufficient safeguards to protect nonexempt 

workers." 146 Accordingly, no changes to the concurrent duties provision are necessary or 

warranted. 

D. LONG/SHORT DUTIES TEST STRUCTURE 

While no proposals have been proffered inviting specific comment, the Chamber 

opposes the general concept of a return to a "long/short" test or to the insertion of a 

quantitative requirement- California-derived or otherwise- to the duties test. 

The Department suggests that it may return "to the more detailed long duties test" 

should, in its estimation, the minimum salary level not sufficiently succeed in 

demarcating between exempt executives and nonexempt employees. However, reversion 

to any iteration of the previously abandoned "long/short" test would entirely undermine 

144 2014 Final Rule at 22136-37. 

145 Id at 22137. 

146 Id 

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President Barack Obama's direction that the Secretary "modernize and simplify the 

regulations." 147 This goal is plainly not met should the Department incorporate any form 

of the old quantitative prong contained in the prior long duties test. Nor is the goal 

furthered by returning to two tests instead of one standard test. 148 

Complicating the duties test by creating a tiered system- requiring employers to 

test multiple requirements under different scenarios- represents neither a modernization 

nor simplification of the analysis. Indeed, when the Department proposed merging the 

long/short test into a single duties test in its 2003 NPRM, the Department concluded: 

The existing duties tests are so confusing, complex and outdated 

that often employment lawyers, and even Wage and Hour Division 

investigators, have difficulty determining whether employees 

qualify for the exemption. 149 

In eliminating the long/short duties test in favor of the current "primary duty" 

tests through the 2004 Final Rule, the Department advanced its goal to reform and 

simplify the regulations. Returning to two tests would reinsert just the issues already 

resolved by the 2004 updates. In particular, two tests would make it more difficult to 

determine the application of the duties test and it would create instability and uncertainty 

amongst the regulated community. In issuing the 2004 Final Rule, and crafting the 

primary duty tests, the Department reached a calibrated balance between the long/short 

147 2015 NPRM at 38517. 

148 For example, the pre-2004 regulations defined the term "bona fide executive" in the following manner: 

(a) Whose primary duty consists of the management of the enterprise in which he is 

employed or of a customarily recognized department or subdivision thereof; and 

(b) Who customarily and regularly directs the work of two or more other employees 

therein; and 

(c) Who has the authority to hire or fire other employees or whose suggestions and 

recommendations as to the hiring or firing and as to the advancement and promotion or 

any other change of status of other employees will be given particular weight; and 

(d) Who customarily and regularly exercises discretionary powers; and 

(e) Who does not devote more than 20 percent ... of his hours of work in the workweek to 

activities which are not directly and closely related to the performance of the work 

described in paragraphs (a) through (d) of this section ... ; and 

(f) Who is compensated for his services on a salary basis at a rate not less than $155 per 

week ... , exclusive of board, lodging, or other facilities: Provided, that an employee who 

is compensated on a salary basis at a rate of not less than $250 per week ... , exclusive of 

board, lodging, or other facilities, and whose primary duty consists of the management of 

the enterprise in which the employee is employed or of a customarily recognized 

department or subdivision thereof, and includes the customary and regular direction of 

the work of two or more other employees therein, shall be deemed to meet all the 

requirements of this section. 29 C.F.R. § 541.1(a)-(f). The requirements outlined in 

section 541.1(a) through (e) were referred to as the "long" test, while the requirements 

outlined in the second sentence of section 541.1 (f) were referred to as the "short" test. 149 2003 NPRM at 15563. 

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tests. For example, in addressing the executive exemption, the 2004 Final Rule retained 

the requirement that an exempt executive must have authority to "hire or fire" other 

employees or must make recommendations as to the "hiring, firing, advancement, 

promotion, or any other change of status," thus expanding the requirements beyond those 

previously found in the then existing "short" duties test. 150 

Indeed, as the Department recognizes in its NPRM, any increase in the salary 

level will have the result that "more employees performing bona fide EAP duties will 

become entitled to overtime because they are paid a salary below the salary threshold." 151 

The resulting reduction in the number of employees who will qualify for an exemption to 

the FLSA's overtime requirements will impact the business community substantially. 

Such changes will only further be complicated by adding new requirements employers 

must contend with-just as having to address new varying exemption tests. 

E. NEW JOB CLASSIFICATION EXAMPLES 

The Department has invited commentary concerning what, if any, additional 

occupational titles or categories should be included as examples in the regulations, 

particularly with respect to positions in the computer industry. For instance, in the 

NPRM the Department expressed the view that a help desk operator whose responses to 

routine computer inquiries (such as requests to reset a user's password or address a 

system lock-out) are largely scripted or dictated by a manual that sets forth wellestablished techniques or procedures, would not possess the discretion and independent 

judgment necessary for the administrative exemption, nor would that individual likely 

qualify for any other Part 541 exemption. 

The Chamber does not recommend the inclusion of any new job classification 

examples at this time because of the inability to review and comment on any such 

examples. For the Department to insert such examples in a final rule poses the same 

problems as noted above concerning the possibility of the Department inserting new 

regulatory text without proposing it. 152 However, to the extent that the Department 

includes additional examples of non-exempt positions, the Chamber alternatively requests 

150 The Department balanced concerns raised by both the employee and employer communities in finalizing 

the current primary duties test contained in its 2004 Final Rule. For example, in response to the 

Department's proposed regulation revising the test to determine an executive exempt employee, the AFLC!O commented, among others, that the proposed phraseology "a primary duty" weakened the test by 

allowing for more than one primary duty and not requiring that the most important duty be management. 

The Department agreed, replacing the word "a" with "whose", reinforcing its intent that an employee can 

only have one primary duty. 2004 Final Rule at 22131. Any attempt to undo the Department's fully vetted 

test- particularly in the absence of proposed regulatory text upon which the public can comment- may 

result in similarly unintended consequences. It further undermines the professed goal of simplifying the 

current regulations. 

151 2015 NPRM at 38531. 

152 The Department seems to be evoking the now-abandoned opinion letter concept with this suggestion, 

however without the most important part: the fact-specific inquiry driven by a regulated party. 

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that the Department also provide examples of exempt versions of any added positions. 

For instance, if the Department follows through on its suggestion to include as an 

example the non-exempt "routine help desk operator," the Chamber would request that 

the Department simultaneously include an example of an exempt elevated help desk 

analyst, (i.e., one who receives computer inquiries that are not routine and require 

advanced troubleshooting techniques not dictated by a manual or help desk "script"). 

Only through such comparison of the job duties are the examples instructive to 

employers. 

Additionally, the Chamber urges the Department not to revisit positions on which 

hundreds of millions of dollars in litigation costs have already been spent and which are 

well-settled by the courts. Positions such as pharmaceutical sales representatives and 

insurance claims adjusters have already been thoroughly adjudicated and found 

exempt. 153 

Revisiting such positions through regulation in an attempt to overturn court 

decisions would create massive uncertainty and instability, in direct contradiction to the 

stated goal of this rulemaking, not to mention effectively undoing the results of countless 

hours and hundreds of millions of dollars spent in litigation. Accordingly, the Chamber 

urges the Department to avoid disrupting years of precedent. 154 

V. COMPLIANCE ASSISTANCE AND ENFORCEMENT 

Given the widespread effect of the proposed salary increases and the necessary 

compliance measures employers will have to undergo, the Chamber advocates a 

graduated implementation period of at least three years and an initial implementation 

period of at least one year. The one-year period is less than that provided for the final 

companionship exemption rule, which impacted just a small subset of the employers who 

will be impacted by the proposed Part 541 revisions. Once the final rule is published, 

employers must commence the time-consuming process of determining the impact upon 

individual organizations, which will undoubtedly include the reclassification of a subset 

of the workforce. Businesses must conduct a cost/benefit analysis with regard to all 

exempt employees currently earning less than the new minimum salary. The resulting 

153 See Christopher v. SmithK/ine Beecham Corp., 132 S. Ct. 2156 (2012) (holding pharmaceutical sales 

reps exempt under the outside sales exemption). See also In re Farmers Ins. Exchange Claims 

Representatives' Overtime Pay Litigation, 481 F.3d 1119 (9th Cir. 2007) (holding claims a£ljusters 

administratively exempt); Robinson-Smith v. Gov't Employees Ins. Co., 590 F.3d 886 (D.C. Cir. 2010) 

(same); Talbert v. Am. Risk Ins. Co. Inc., 405 Fed. Appx. 848 (5th Cir. Dec. 20, 2010) (same). 

154 We note that the Department has included computer employees as one category of exemption covered 

by this rulemaking, but has only adjusted the salary level for these under sec. 541-400 (b). The Chamber 

maintains its unequivocal objection to making any changes to the duties tests through final regulatory 

language, but urges the Department to pursue a de novo rule making that would propose more 

comprehensive changes so that, in addition to the professional exemption, computer employees could also 

be exempted under the administrative exemption. 

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increases in labor costs must be planned for and included in operating budgets, the timing 

and frequency of which varies from organization to organization. Therefore, the 

Chamber urges the Department to realistically assess the time in which the business 

community will need to implement any changes effectuated by the final rule. 

Moreover, with any change comes opportunity. As we stated in our February 9, 

2015 letter to Secretary Perez, 155 we would be remiss not to address the improvements in 

compliance assistance the Department should institute in combination with the final rule. 

In order to achieve and maintain effective regulatory compliance, the Wage and Hour 

Division must be willing to provide employers with meaningful compliance assistance 

and to support those employers who seek to self-correct identified concerns which will 

certainly result from any regulatory changes. A safe harbor should be extended for a 

reasonable period following the final rule to afford businesses the opportunity to fully 

assess their operations and ensure regulatory compliance. We also recommend instituting 

a Voluntary Settlement Program similar to that utilized by the Internal Revenue Service 

-where employers who self-disclose a violation to the WHO can agree to pay I 00 

percent of back wages, but are not subject to a third year of willfulness back wages, 

liquidated damages or civil money penalties, and are issued WH-58 forms to obtain 

employee waivers. 

Without corresponding compliance assistance, any changes instituted by the 

Department will punitively impact an employers, benefiting no one. Accordingly, the 

Chamber seeks a flexible and reasoned approach from the WHO to ensure that employers 

who seek to comply are given the assistance and support to do so. 

VI. THE DEPARTMENT'S FUNDAMENTLY FLAWED ECONOMIC 

ANALYSIS GROSSLY UNDERESTIMATES THE COSTS OF THIS 

RULEMAKING 

The Department has failed to apply seriously the principles of a thorough and 

objective regulatory economic cost/benefit analysis envisioned in Executive Orders 

12866 (September 30, 1993) and Executive Order 13563 (July II, 2011). As President 

Obama stated in Executive Order 13563, regulations "must protect public health, welfare, 

safety, and our environment while promoting economic growth, innovation, 

competitiveness, and job creation." 156 Regulations should "promote predictability and 

reduce uncertainty," "identify and use the best, most innovative, and least burdensome 

tools for achieving regulatory ends," and "must take into account benefits and costs, both 

quantitative and qualitative." 157 To achieve these principles, President Obama reaffirmed 

155 A copy of the February 9, 2015 correspondence is attached under Appendix F for further consideration. 

156 E.O. 13563 at§ !(a). 

157 !d. 

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that each agency, including the Department of Labor, must "propose or adopt a regulation 

only upon a reasoned determination that its benefits justify its costs," "tailor its 

regulations to impose the least burden on society," and "quantify anticipated present and 

future benefits and costs as accurately as possible." 158 

These principles provide a framework for reasoned rulemaking against which the 

Department's economic analysis in this rulemaking must be judged. The Executive 

Orders reflect the purpose of the Administrative Procedure Act to provide for public 

participation in a structured, analytic rulemaking process. The framework provided by 

the Executive Orders helps to ensure that rulemaking decisions are made on the basis of 

demonstrated evidence and that the reasoning underlying a decision was documented and 

could be replicated. Rather than adding a burden to regulators, the requirements of the 

Executive Orders should be seen as a means of protecting the agency from charges of 

arbitrary and capricious action. If an agency diligently follows the requirements and 

intent of E.O.s 12866 and 13563 by making regulatory decisions based on rigorous 

regulatory impact analysis, the risk of costly litigation and attendant delay of needed 

action is reduced. 

Four fundamental flaws in its economic analysis demonstrate that the Department 

has not complied with the Executive Orders, and thus, brings into question whether the 

Department's proposal will pass scrutiny under the Administrative Procedure Act: 

1. Reliance on the Current Population Survey as the sole source of salary 

data. 

2. Inadequate assessment of compliance costs, transfers, benefits, 

regulatory flexibility analysis and unfunded mandate impacts. 

3. Inadequate analysis of the full costs and benefits of available 

alternatives; and 

4. Inattention to the regulatory risks inherent in a sudden change in 

regulatory requirements and salary test adjustment procedures. 

Each of these flaws is examined and discussed below. 

A. THE DEPARTMENT'S RELIANCE ON THE CURRENT POPULATION SURVEY AS 

THE SOLE SOURCE OF SALARY DATA Is INAPPROPRIATE 

In addition to proposing the unjustifiably high 40th percentile, the Department's 

proposal is further flawed because the agency relied solely on inappropriate Current 

Population Survey ("CPS") data. The Department's reliance on the CPS data is 

158 E.O. 13563 at§ !(b) & (c). 

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inappropriate on two levels: First, the CPS data is generally inappropriate because it 

does not provide information on key questions that need to be answered to determine 

reasonably the minimum salary for exemption. The Department could have obtained 

additional and more relevant data. Second, the Department has chosen to rely on a subset 

of the available CPS data that is particularly inappropriate. Other tabulations of the CPS 

data should have been considered by the Department to inform its salary test level 

determination. Consideration of the full range of alternative data tabulations necessarily 

leads to a different and lower minimum salary level. 

The Current Population Survey data has been compiled, tabulated and analyzed 

monthly since 1948 by the Bureau of the Census and the Bureau of Labor Statistics. CPS 

data is a valuable national statistical resource which serves many useful purposes, and the 

purposes it serves best are those for which it was designed. The Current Population 

Survey was never intended or designed to serve as a basis to inform regulatory decisions 

regarding the salary level for the FLSA white collar exemptions, and thus, the CPS data 

is inappropriate as the sole or primary data source to rely upon to inform a regulatory 

decision on the minimum salary threshold for the white collar exemptions. The CPS data 

fails to provide complete and precise answers to the key questions that face the FLSA 

regulatory decision maker: How many employees perform bona fide executive, 

administrative or professional duties? What fixed salary amounts are bona fide exempt 

employees paid and what weekly hours do they work? What are the salaries or hourly 

rates of non-exempt employees supervised by bona fide exempt employees, and what 

hours do they work? How prevalent is it that employees are misclassified as exempt? 

1. How many workers perform bona fide executive, administrative or 

professional duties required by Part 541 

The actual total count of bona fide executive, administrative or professional 

workers is less important than the identification of actual workers who satisfy the duties 

test. Identification of bona fide exempt workers is the essential first step leading to a 

description of the range of salaries and the range of duties. The CPS only provides 

occupational titles, there are no questions about duties, authority, or other factors critical 

to the statutory definition of exempt workers. 

The current regulation makes it clear that job title alone is insufficient to 

determine exempt status, and the rule proposed by the Department does not contemplate 

changing that: 

Sec. 541.2 Job titles insufficient. A job title alone is insufficient to 

establish the exempt status of an employee. The exempt or nonexempt 

status of any particular employee must be determined on the basis of 

whether the employee's salary and duties meet the requirements of the 

regulations in this part. 

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This shortcoming of the CPS data is complicated by the fact that the job title and 

other information may be incomplete or erroneous for several reasons. The survey is 

based on brief, limited individual verbal responses. There is little follow up, so the 

interview record of Benjamin Franklin, for example, would miss important detail if his 

initial response was modestly to describe his occupation as "printer." The CPS 

interviews are brief and provide no opportunity for in-depth inquiry about job functions, 

duties and other details that are relevant to FLSA exempt status determination. 

Another complication is that the individual subject is not always the direct 

respondent to CPS questions. The survey collects data about everyone in a household 

from a single respondent who tells what he or she knows about the occupation, earnings, 

hours worked, how they are paid and other characteristics of each household member. 

These responses, especially about other household members may be inaccurate, and there 

is little or no follow-up in the survey procedure to verify responses. 

Since the CPS data only includes this imprecise and potentially incomplete or 

erroneous job title information, it totally fails to identify whether a person performs the 

duties of exempt executives, administrators or professionals as set forth in Part 541: 

• For executives, the definition in the current regulation includes the 

requirement that the individual "customarily directs the work of two or 

more other employees," but the CPS data on which the Department relied 

for its analysis contains no information about whether a worker supervises 

the work of any other employee and, therefore, no information regarding 

putative numbers supervised. 159 

• For executives, the current regulation includes the requirement that an 

exempt executive must have the authority to hire or fire, promote or 

otherwise change the status of other employees or to make 

recommendations that are given particular weight in such decisions. 

Nothing in the CPS data relied upon by the Department provides any 

information about whether or not this requirement is met by any survey 

respondent. 160 

• Regardless of primary duties and other factors listed, any employee who 

owns at least a 20 percent equity share in the business and who is "active" 

in its management is exempt as a business owner. Nothing in the CPS 

data provides information on ownership at this level of detail. 161 

159 29 C.F.R. § 541.100. 

160 Id 

161 29 C.F.R. § 541.101. 

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• Exempt administrative employees must perform work requiring the 

"exercise of discretion and independent judgment with respect to matters 

of significance." 162 Nothing in the CPS data addresses the discretion or 

independent judgment exercised by any employee. 

• For professional employees, the exemption requirement states that the job 

requires "knowledge of an advanced type in a field of science or learning 

customarily acquired by a prolonged course of specialized intellectual 

instruction." 163 The CPS data does contain information regarding the 

highest level of educational attainment of each respondent, but there is no 

indication of whether the education attained is relevant to the job in which 

the person is employed. 

2. What ]!Xed salary amounts are bona fide exempt employees paid and 

what weekly hours do they work 

The current white collar regulations also require that an employee be paid a 

minimum amount on a salary basis, defined as "a predetermined amount" which "is not 

subject to reduction because of variations in the quality or quantity of the work 

performed." 164 The FLSA statute does not include any provision for the salary level and 

salary basis tests, but the Part 541 regulations establishing these tests have been 

recognized over the years as an exercise of agency discretion to facilitate easier 

administration and enforcement. It has been recognized consistently since the first salary 

test regulation was issued in 1938 that it is important to know how many legitimately 

exempt employees are excluded by any contemplated salary test line and to select a line 

that balances the joint objectives of minimizing the number of legitimately exempt 

individuals and of meeting the intent of the law to ensure that employees entitled to the 

FLSA overtime premium pay are provided that protection. 

The CPS data does not address the details required to determine whether or not 

employees are paid a fixed and guaranteed salary (or fees), regardless of hours worked. 

The CPS data relied upon by the Department distinguishes only workers paid on an 

hourly basis (implying that weekly earnings vary with the hours worked) and categorizes 

all others as "non-hourly." All salary or fee based wages are included in non-hourly CPS 

data, but an unknown number of other non-qualifying wage payment methods are also 

included. For example, the "non-hourly" CPS data would include non-exempt inside 

sales employees paid I 00 percent on commission and non-exempt employees paid on a 

piece rate. The CPS non-hourly worker category is at best a rough and imprecise 

measure of workers paid on the basis required for exempt status. No known evaluation 

162 29 C.F.R. § 541.200. 163 29 C.F.R. § 541.300. 164 29 CF.R. § 541.602. 

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studies or interviews have ever been conducted to determine what proportion of nonhourly workers represented in the CPS data actually are paid on a true salary or fee basis 

as required in the Part 541 regulations. 

The CPS only provides a rough delineation of workers paid on an hourly basis 

versus those paid on all other bases, of which a fixed salary is a subset. The data 

collected in the CPS survey on hours worked - usual weekly hours and hours actually 

worked during the survey reference week- provide only a limited glimpse of the 

dimensions and context of employees work schedules which may vary significantly over 

the course of a year. 

The 2013 CPS data that was relied upon by the Department includes numerous 

respondent records where the weekly earnings amount for non-hourly workers is 

obviously inconsistent with the number of actual hours of work reported. 

Being paid on a salary or fee basis is a long recognized component of white collar 

regulations. Employees not paid on a salary or fee basis (other than doctors, lawyers and 

teachers) cannot qualify for the executive, administrative or professional exemptions 

even if paid far above the minimum salary level and performing exempt duties at the 

highest level. However, being paid on a salary basis is not sufficient to establish exempt 

status. Many non-exempt employees are paid on a salary basis - secretaries, payroll 

clerks, bookkeepers, paralegals Oust to name a few) as an administrative convenience to 

the employer and as a benefit to the employee. Knowing with some certitude the 

proportions of the employees in the "non-hourly" CPS data set who are paid on a salary 

basis and perform exempt job duties, and knowing the variation of weekly earnings of 

such employees in comparison to the weekly earnings of"non-hourly" employees who do 

not meet the requirements for exemption is necessary for both setting the salary test level 

and for estimating the economic impact of a proposed change in the salary test level. The 

CPS data does not provide information necessary to make these determinations and 

distinctions. 

3. What are the earnings and work hours of non-exempt employees 

supervised by bonafide exempt employees 

The 1940 Stein report and successive reports examining the salary test have taken 

note of the wide variation across industries, across sizes and types of organizations within 

industries and across. The relationship between the salaries of supervisors, while 

generally higher than earnings of the hourly employees they supervise, varies widely and 

is often only a small proportion greater than the weekly earnings of those they supervise. 

Earlier salary test rulemakings took note of the context of exempt supervisors' earnings 

in relation to the earnings of the non-exempt workers whom they supervised. Generally, 

previous salary test determinations have considered that setting the national benchmark 

too high could interfere with the ability of executives in low salary regions or industries 

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to effectively supervise and manage because non-exempt status could constrain their 

hours relative to the hours of the workers they supervise. 

The CPS data includes information on the earnings, hours and occupations of 

hourly workers and non-hourly workers, but the data lacks in many cases the detailed 

information needed to delineate the supervisors from the supervised necessary to analyze 

the relative earnings of the connected groups. Only a few of the occupation groupings 

contain distinct coding to distinguish supervisory and line workers, and even in those 

cases, the CPS data lacks the duties information needed to distinguish validly exempt 

supervisors from non-exempt working foremen and team leaders. 

4. How prevalent is it that persons are misc/assijied as performing exempt 

duties · 

Balancing the effect of a salary test between excluding workers from an exempt 

status that they are entitled to have versus the effect of a salary test to guarantee FLSA 

protection to workers who are entitled to that protection has always been an important 

consideration for setting the salary test. To accomplish the necessary analysis, the 

regulatory decision maker needs accurate and timely information about the incidence of 

misclassification of workers who should properly be assigned non-exempt status. In 

particular this information is needed at the detailed occupation and industry levels of 

identification, and it needs to be analyzed in relation to weekly earnings amounts. 

The general principle that the likelihood of valid exempt status rises with earnings 

and that the incidence of misclassification as exempt falls with earnings has been long 

recognized, but operationalizing those correlations into a practical framework that the 

salary test regulatory decision maker can use is beyond the scope of the CPS data 

resource. The CPS provides no definitive information regarding how persons are 

classified or whether their classification is correct or not. One may presume that CPS 

respondents who report being paid on an hourly basis are classified as non-exempt, but 

the pay basis report by the employee on the CPS may be subject to an unknown degree of 

reporting error. 

Also, for potentially misclassified persons, even if one could hypothesize that a 

CPS respondent of certain characteristics should be classified as non-exempt and paid on 

an hourly basis, it is not clear whether the non-hourly earnings variable in the CPS data 

reflects a "salary" in the sense required by the FLSA or some other compensation method 

which is permissible under FLSA for non-exempt workers. 

Even if a worker is paid on a true fixed salary basis, the question of FLSA 

misclassification would not arise unless the respondent actually reported having worked 

over 40 hours. Since the CPS data provides information about actual weekly hours and 

earnings for only a single week during the year, the CPS does not provide the necessary 

information. The employee in question may actually be paid on an hourly basis with 

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overtime premium for hours beyond 40, but the proxy respondent to the CPS interview 

may be ignorant of the fact. Only a fraction of the individuals represented in the CPS 

data are directly interviewed. Many responses are provided by another household 

member on the subject's behalf 

B. BECAUSE OF THE WEAKNESSES IN THE CPS DATA, THE DEPARTMENT 

SHOULD CONSIDER OTHER DATA ALTERNATIVES BEFORE SETTING THE 

SALARY LEVEL OR, IN THE ALTERNATIVE, SHOULD CORRECT FOR THE 

WEAKNESS BY SELECTING A MUCH LOWER PERCENTILE 

The CPS is not the only data alternative, as some have claimed. The alternative 

of conducting original field research is always available, has been used successfully in 

past FLSA exemption salary test determinations, especially in the 195 8 Kantor report, 

and also, to some extent in the 1940 and 1949 determinations. Collecting original data 

through field surveys, interviews, and systematic compilation of enforcement 

investigation reports provides the advantage of having been collected with the intended 

use in mind. Reliance on CPS data attempts to fit to the present use data that was 

collected for a completely different purpose. 

The better course was indicated by the 1958 Kantor report, which is well 

described in the history section of the Department's present NPRM. 165 The Kantor 

analysis to set FLSA overtime exemption salary thresholds was primarily based on the 

analysis of detailed records of individual worker duties and salary information in the 

context of actual, documented exemption classification determinations. The data used 

was the product of intensive field research by the Department. 

The field research exemplified by the Kantor project to collect appropriate and 

accurate data regarding the earnings and working contexts of individuals who actually do 

perform the executive, administrative and professional statutorily exempt duties defined 

in the FLSA is the model that the Department should have followed. 

The 1998 "Delphi" process for estimating correct classification probabilities for 

certain occupations based on the experiences of WHO enforcement officers was a step in 

that right direction, but it did not go far enough toward the detailed field work that could 

be and should be done, and the fact that the 1998 analysis effort is now 17 years out of 

date, renders the Department's current reliance on it in the present regulatory analysis 

highly questionable. Below, the Department's reliance on the 1998 estimates of 

exemption probability is discussed as a significant source of potential error in the 

estimates of the administrative costs, income transfers and monetized benefits of the 

proposed rule. 

165 2015 NPRM at 38525. 

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The Department had the opportunity over the past six years to have taken a more 

deliberative approach informed by systematic compilation of appropriate data focused on 

these key questions and other important related ones. Instead, the Department has 

attempted to obtain from the Current Population Survey answers to questions that the 

CPS does not ask. 

C. THE NON-HOURLY WORKERS' DATA USED WAS SPECIFICALLY 

INAPPROPRIATE 

The Department's selection of the proposed new salary test minimum threshold 

for the Part 541 exemptions is based on a published BLS table showing deciles of weekly 

earnings of non-hourly workers based on pooling of 12 months of CPS Outgoing 

Rotations Supplement (Earner Study) data for 2013. This is a new "research series" that 

BLS began publishing in January 2015 at the request of the Department's Chief 

Economist. It reported that the 40th percentile cut point (the value at or near the 40th 

cumulative percent of observations ranked from lowest to highest) as $921 per week. 

The replication file matched this result closely: $923 per week as shown in column I, 

non-hourly workers, in Table I, supra. The other decile values also closely matched the 

BLS table published in the NPRM. 

The data represented by column I includes workers listed in 477 ofthe 483 

distinct occupation titles associated with hourly-paid workers, many of which seem on 

the face to be unrelated to exempt white collar work. Table 7 comprises a list of all 

occupational titles represented in the 2013 CPS data and shows tabulation of the numbers 

of hourly and non-hourly workers estimated by the survey under each occupational title, 

and the proportion of each occupation represented by non-hourly workers. 166 

The Department explicitly justifies the inclusion in its weekly earnings data 

replicated in column I of workers in occupations presumably not covered by the FLSA 

Part 541 regulations by stating that their "salaries may shed light" on the earnings of 

exempt workers and so are useful for the consideration of salary test level regulatory 

decisions. 

Since most occupations, including those occupations that might possibly involve 

exempt executive, administrative or professional duties, are represented in the hourly 

category well as the non-hourly category, it is arguable that the earnings of hourly 

workers similarly may shed light on the rulemaking decisions. Accordingly, Table 1, 

column 2, Hourly Workers, shows a tabulation of weekly earnings by decile for workers 

who are paid on an hourly basis, and presumably may be classified as non-exempt under 

FLSA, i.e. entitled to overtime premium pay if they work more than 40 hours during the 

week. It should be noted, however, that the hourly-paid workers represented by the 

166 Tables I, 2 and 3 appear supra in these comments. The remaining tables (Tables 4 to 8) are attached 

under Appendix G. 

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wages shown by decile in Table 4, column 2, like the non-hourly workers represented in 

Table 4, column 1, include persons in occupations or industries not covered by the 

overtime provisions of the FLSA statute or exempt under other regulations besides the 

Part 541 regulations that are the subject of the proposed regulation. 

Table 1, column 3, shows the weekly earnings by decile for the combined group 

of hourly and non-hourly workers. This combined group of hourly and non-hourly 

workers, like the group of only non-hourly workers presented by the Department, 

includes in addition to workers whose occupations suggest the possibility of coverage by 

the FLSA Part 541 regulations, other workers in named occupations that are explicitly not 

covered, i.e., physicians, lawyers, teachers and most federal employees. The inclusion of 

this broader group of non-hourly occupations, according to the Department, usefully 

"sheds light" on the earnings of potentially covered workers and thus the Department 

asserts is appropriate to include in the database used to analyze salary test questions. 

Since the hourly-paid workers data includes all 4 77 of distinct occupation titles included 

in the non-hourly data relied upon by the Department, and only 6 occupations (motion 

picture projectionist, rolling machine setters, textile knitting machine setters, textile 

winding and twisting machine setters, extruding machine setters, and metal pickling 

machine tenders) of hourly-paid workers are not duplicated among non-hourly workers, 

the Department should have also considered that the earnings of the two groups 

combined may similarly "shed light" on the salary test decision. Note that when both are 

tabulated together, the 40th percentile that the Department is proposing as a particularly 

notable oenchmark corresponds to a weekly earnings amount of$673 in column 3 

representing the combined group of all workers regardless of how they report being paid. 

The median (50th percentile) for the combined group in 2013 had weekly earnings of 

$788, and the amount corresponding approximately to the $923 per week 40th percentile 

in column I (non-hourly only) is near the 60th percentile ($962 per week) for the 

combined group. 

Table 1, column 4, shows deciles of weekly earnings for a subset of non-hourly 

workers who usually work full time schedules who either reside in the South Census 

Region or who are employed in the retail trade industry sector nationwide. This subset 

approximates the approach used to set the salary test in the 2004 rulemaking, referencing 

a low wage region and a low wage industry sector, except that in accordance with the 

approach proposed now by the Department, the data set includes the full range of 

occupations, including ones not actually covered by the Part 541 regulations. As with the 

other data tabulations shown in Table 1, no attempt has been made to differentiate 

workers who may be eligible for exemption based on duties from those not eligble based 

on duties, and the underlying data includes workers whose weekly earnings are below the 

current $455 salary threshold (slightly under I 0 percent of all non-hourly workers). For 

this subset, the weekly earnings corresponding to the proposed 40th percentile is $858. 

The 2004 rule making used a 20th percentile benchmark in relation to the low-wage 

industry/region combination, to arrive at the $455 salary test benchmark set in 2004. For 

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the comparable 2013 data, the 20th percentile benchmark corresponds to a weekly 

earnings amount of$600 under column 4. 

Table I, column 5, shows deciles of weekly earnings for similar South Region 

plus Retail Industry subsector of workers who usually work full-time (35+ hours per 

week) for the combined set of hourly and non-hourly workers, but not those not covered 

by Part 541, i.e. a better data set for determining the salary threshold. The 40th 

percentile benchmark for this group is $600 per week ($31,200 annually) and the 20th 

percentile is $440 per week ($22,800 annually-actually less than the current salary 

threshold) weekly earnings for all hourly and non-hourly workers combined. 

The Department has presented the idea that the 40th percentile of weekly earnings 

is a significant benchmark to consider in the context of the Part 541 salary test 

determination, but the question remains "40th percentile of what group of workers?" The 

variety of tabulations shown in Table I illustrate the variability of answers that can be 

obtained from 2013 CPS data depending on how the relevant group of workers to 

examine is defined, notwithstanding the qualitative limitations of CPS data as noted 

previously. The answers vary even more when one considers that the proposed 40th 

percentile is a higher percentile benchmark than has been used in previous salary test 

rulemakings. The variations that are illustrated in Table I are roughly similar to the 

variations shown in the Department's NPRM Table 13, but without the problematic and 

questionable pooling of data across years and attempt at finding definitive exempt/nonexempt duties in CPS data that provides no such information that characterizes the 

Department's analyses for the 2004 and Kantor alternatives analyses. 

D. INADEQUATE ASSESSMENT OF COMPLIANCE COSTS, TRANSFERS AND 

BENEFITS 

The Department estimates that the proposed revision of the salary level will 

impose $592.1 million in direct compliance costs on affected businesses (including nonprofit organizations) and state and local governments in the initial compliance year, 

largely composed of $254.5 million in familiarization costs of learning about the revised 

salary level by business owners and managers and of assessing whether or not the 

affected establishment has workers affected by the revised threshold. The Department's 

cost estimates assume that the familiarization cost element will occur only the first year 

of implementation of the new salary test, based on the presumptions that the salary test 

value will remain fixed thereafter. This assumption is in direct contradiction to the 

Department's stated plan to implement annual changes in the salary test, increasing it 

either to maintain the 40th percentile value despite wage growth or to adjust the value in 

relation to price inflation. With automatic adjustment, familiarization costs would repeat 

with every annual revision of the salary test. In addition to familiarization costs, the 

Department also estimates first year (I) administrative costs of identifying affected 

employees (those earning weekly salaries under the revised salary threshold) and 

adjusting their pay and/or payroll status ($160.1 million), and (2) managerial costs of 

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increased supervision of the work schedules of those added to the overtime eligible 

category ($178.1 million). The adjustment and managerial costs decrease, according to 

the Department's estimates, in the second and subsequent years, ranging from $170.1 

million in the second year to $93.2 million in the lOth year. Each of these cost estimates 

is flawed by inaccurate assumptions about the labor costs activities and the labor-time 

parameters of compliance activities. Each of the elements of direct compliance costs is 

discussed in detail below. 

1. Familiarization Costs 

The Department assumes that each of7.44 million affected establishments will 

expend on average one hour of labor time to learn about and to assess whether the rule 

includes any provisions that affect any workers of the establishment. The Department 

assumes that the cost to the establishment will be $34.19 per labor hour. Across 7.44 

million affected establishments the total is estimated by the Department to be $254.5 

million. 

The estimate of one hour familiarization time is not based on any presented 

empirical evidence, surveys, experiments, or opinions of documented experts. The 

proposed regulatory text plus accompanying discussions and explanations would take the 

average reader several hours for a first review, and full comprehension would likely 

require several reviews and other research. It is unrealistic to assume that only one 

person in each potentially affected establishment will be sufficient to read and assess the 

regulation. 

For larger establishments the labor time requirement for the familiarization stage 

will likely increase exponentially as both the number of employees and the numbers of 

managers involved increases. Conferences with inside and outside legal counsel will be 

necessary for larger organizations. 

Unionized workplaces will need to consult with labor representatives to assess the 

need and complexities of potential reclassifications of workers. Employees classified as 

"exempt" may currently be excluded from a collective bargaining unit as a manager or 

supervisor. Reclassification to non-exempt may put an "employee"- no longer a 

"supervisor"- under the collective bargaining unit. Such an issue may be subject to a 

bargaining obligation at a minimum or raise an issue to be resolved through grievance 

and arbitration. If reclassified employees become subject to the CBA, the employer will 

need to determine what terms and conditions are applicable; can the employer unilaterally 

set the employee's pay rate or must the employee be slotted into ranges and pay grades 

already established; and how benefit entitlements and contributions will be calculated? 

The reclassified employee may have enjoyed a more robust benefit package than the nonexempt employees and may have even made a contribution for insurance coverage that 

was different than those for bargaining unit employees. If the employer takes the 

position that the reclassified employees are outside of the bargaining unit, the union may 

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file a unit clarification petition or argue an accretion to the existing unit. The proposed 

rule does not consider the resources necessary to resolve any of these issues. 

For the very smallest establishments a familiarization time of one to two hours 

may be possible, but for larger establishments the number of labor hours may amount to 

hundreds or more. 

The potential familiarization cost based on the labor time and establishment 

numbers parameters assumed by the Department would increase to $1.5 billion if the 

average establishment time were just 6 hours. This illustration makes obvious the need 

for the Department to research carefully the question of compliance time by conducting 

empirical research. Retrospective studies of familiarization cost experience of employers 

affected by recent regulations in other contexts would be one source of information. For 

example, the Department could easily conduct a survey of employers affected by recent 

Office of Federal Contract Compliance Programs regulations regarding affirmative action 

programs for Veterans and Persons with Disabilities to assess actual time expended for 

regulatory familiarization. The results of such a survey could be scaled to account for 

differences in complexity of the subject regulations and provide familiari;mtion time 

parameters that could be applied to other rulemakings. Alternatively, the Department 

could conduct an internal experiment in which offices within the Department or other 

Federal agencies were designated as proxy "establishments" and tasked to review and 

assess the proposed rule with an imagined perspective of assessing its applicability to 

their unit. By selecting experiment units of various sizes and requiring each to record the 

labor times and activities involved in the exercise a credible estimate of familiarization 

time as it varies by establishment size could be developed. 

In addition, challenges to improperly classifying employees as exempt can be 

defended by raising the "good faith" defense the FLSA provides. That defense frequently 

is established by documenting the legal advice and fact-gathering that supported the 

determination. The efforts a prudent employer must engage in to prevail on that defense 

is likely to far exceed the 15 minutes assumed by the Department. 

The unit labor cost parameter, $34.19 per hour is clearly inaccurate. The 

Department has used a compensation amount (wages plus fringe benefits) for a human 

resources office administrative clerk, a position that is itself clearly not exempt under the 

FLSA rules. It should be obvious that the assessment of the implications of this rule on 

an organization will be the duty of an exempt executive or administrator, earning 

compensation at the $60 per hour range published by BLS for managers. In addition, the 

Department has failed to fully account for the economic opportunity cost of redirecting 

labor for productive activity to the regulatory compliance activity. Our previous study of 

Federal management services contracts found that the government routinely pays private 

contractors a fully-loaded rate of $200 per hour for the services of a project manager 

whose basic compensation (wages plus fringe benefits) is $60 per hour, amounting to a 

markup of 3.3 times direct compensation to cover indirect overhead and support services 

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cost. Adjusting the per hour cost accordingly, the cost of the Department's estimated one 

hour per establishment for familiarization cost increases from the published $254.5 

million to a total of $1.49 billion. 

At an average of 6 hours familiarization time and the revised opportunity cost of 

$200 per hour, total familiarization costs total $8.9 billion per year. 

If the Department implements an automatic annual adjustment to the salary test 

every year, the $8.9 billion calculated as a first year cost would recur every year. 

These calculations are illustrative, and they show the need for the Department to 

conduct research to produce credible estimates of the labor time required and for the unit 

labor opportunity cost, including reasonable overhead allowances, which may vary by 

establishment size and industry for the critical estimation of cost for the familiarization 

step of regulatory compliance. 

2. Adjustment Costs 

The Department estimates that firms will incur initial and on-going costs to redetermine the exemption status of each affected employee, to update and revise overtime 

policies, to notify employees of policy changes and to adjust payroll systems to 

accommodate reclassified employees. Given the large number of employees who will be 

impacted by this change, it would be impossible for large employers to properly assess 

the impact without the assistance of third-party consultants or law firms. 

The Department estimates that it will require one hour per each of 4.682 million 

affected exempt employees whose current weekly earnings are below the proposed salary 

threshold and will be converted to non-exempt status (hourly or salaried with 

monitored/managed schedule). The Department admits that it has no basis for this 

estimate and requests the public to offer data suggestions. The available public comment 

period is too short for public commenters to undertake meaningful experiments or 

assessment of this question. The Department had the time and resources to develop a 

scientifically credible research-based estimate of these costs, varied by establishment size 

and industry. The estimate of one hour per affected employee has no basis in reality. 

Considering that each employee adjustment will involve management time at several 

levels of authority and discussions, the time per employee for all labor effort involved in 

the process could range from at least 4 hours to several days depending on the complexity 

of the case. As an illustration, an average of just 4 hours per affected employee (probably 

the minimum) would raise the adjustment cost from the Department's estimate of $160.1 

million to $640.4 million, using the $34.19 per hour labor rate assumed. 

As discussed previously, the Department's estimated per hour labor rate is an 

inaccurate estimate of full labor opportunity cost. Using the alternative $200 per hour 

rate based on Federal government contract procurement of project management services, 

$3.75 billion per year may be a more likely conservative estimate of the adjustment cost. 

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The Department estimates that adjustment costs will fall significantly after the 

first year when most of the adjustment will occur, but that decline ignores the proposed 

annual automatic adjustment of the salary threshold. With annual adjustment of the 

salary threshold as proposed by the Department a more significant annual adjustment cost 

will continue. Even if the subsequent adjustments involve only I 0 percent of the number 

of workers initially affected, the annual adjustment cost going forward could be $375 

million per year. 

The adjustment cost example, again, illustrates the need for the Department to 

conduct careful empirical research to understand the potentially costly implications of its 

proposal. 

3. Management Costs 

Conversion of currently exempt salaried employees to non-exempt hourly or nonexempt salaried status under the proposed salary test threshold will require closer 

management monitoring and supervision of the schedules of affected employees. The 

Department estimates $178.1 million per year in additional management costs. 

The Department assumes that only 1.022 million of the 4.682 million affected 

exempt employees who will be converted from exempt to nonexempt status will require 

additional management of their schedules. The Department bases this on the CPS data 

for 2013 that shows 1.022 million currently exempt workers usually work over 40 hours 

per week now and will require management time to contain or approve their future 

schedules. This is an unrealistic assumption because even those who usually work only 

40 hours will require additional management schedule monitoring to ensure that their 

hours do not go higher. In many companies, hourly time is reviewed and approved daily 

to ensure accurate reporting of time. Therefore, management time will increase regardless 

of overtime consideration and approval. Applying the Department's 5 minutes per 

employee per week management effort and estimated $40.20 cost per hour of 

management time, the Department's estimate of $178.1 million per year increases to 

$815.6 million per year. Moreover, even those who work overtime only intermittently 

will require their overtime hours to be managed. 

The Department's estimate of 5 minutes of management time per year is not 

based on any empirical evidence. The Department admits this and asks for public 

comment to provide data. Again, the Department could have conducted field research or 

experiments to obtain credible estimates. Five minutes per week is de minimus. As an 

illustration 30 minutes per day would increase the management cost to $4.9 billion per 

year. 

The Department's per unit labor cost estimate of $40.20 per hour for a manager is 

a median not a mean. The mean is about $60 per hour ($124,000 per year) and adjusting 

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for correct overhead cost load, a more likely correct figure is $200 per hour on average. 

This changes the total cost, along with the previous adjustments to $24.3 billion per year. 

Combined adjusted cost estimates total $36.95 billion for the initial year and 

$33.52 billion for each subsequent year. The Department calculated decreases in 

subsequent yearly costs in future years as wage inflation pushes workers above the salary 

threshold, but that calculation ignores the planned annual adjustments of the salary 

threshold. With annual adjustments occurring, it is possible that the ten year cumulative 

cost of the proposed rule will be $338.5 billion. 

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CONCLUSION 

United States Chamber of Commerce 

Comments on RIN 1235-AAII 

For the foregoing reasons, the Chamber believes the Department should abandon 

its proposed rulemaking in its entirety. Finalizing this proposal will create significant 

disruptions to employers, and most importantly will not achieve the administration's goal 

of increasing income for employees. 

In the alternative, the Department should adopt only a modest increase in the 

minimum salary level required for exemption consistent with ranges previously adopted 

as described in these comments, supported by data reflecting actual employees and 

respecting regional economies with low costs of living and economic sectors with low 

wages. If the Department does not significantly reduce its proposed minimum salary 

level, it should phase in the increase over a five year period. Neither congressional intent 

nor the regulatory history of Part 541 support automatic increases to the salary levels and, 

accordingly, this approach should not be finalized. Finally, no changes to the duties tests 

for exemption should be implemented without a full Notice of Proposed Rulemaking 

outlining the specific changes proposed to the regulatory text and providing the public 

with the opportunity to comment on those proposed changes along with the required 

economic and regulatory impact analyses. 

Randel K. Johnson 

Senior Vice President 

Sincerely, 

Marc Freedman 

Labor, Immigration & Employee Benefits 

Executive Director of Labor Law Policy 

Labor, Immigration & Employee Benefits 

Of Counsel: 

Tammy D. McCutchen 

Libby Henninger 

Littler Mendelson, P.C. 

1150 17th Street, NW 

Suite 900 

Washington D.C. 20036 

Consulting Economist: 

Ronald Bird, Ph.D. 

Senior Economist 

Regulatory Analysis 

U.S. Chamber of Commerce 

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Appendix A 

List of FLSA Overtime Exemptions 
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FLSA Overtime Exemptions 

I. 29 U.S.C. § 203(e)(3) (the tenn "employee" does not include individuals employed in 

agriculture by their parents). 

2. 29 U.S.C. § 203(e)(4) (the term "employee" does not include individuals who 

volunteer to perfonn services for public agencies). 

3. 29 U.S.C. § 207(b) (3) (overtime exemption for certain employees of an 

independently owned and controlled local enterprise engaged in the wholesale or bulk 

distribution of petroleum products). 

4. 29 U.S.C. § 207(i) (overtime exemption for certain commissioned employees in retail 

and service establishments). 

5. 29 U.S.C. § 2070) (partial overtime exemption for employees of establishments 

engaged in care of sick, aged or mentally ill). 

6. 29 U.S.C. § 207(k) (partial overtime exemption for fire protection and law 

enforcement employees). 

7. 29 U.S.C. § 207(m) (partial overtime exemption for certain employees stripping, 

grading, handling, stemming, re-drying, packing or storing tobacco). 

8. 29 U.S.C. § 207(n) (partial overtime exemption for rail, trolley and bus drivers 

engaged in charter activities). 

9. 29 U.S.C. § 207(q) (partial overtime exemption for employees receiving remedial 

education). 

10. 29 U.S.C. § 213(a)(l) (minimum wage and overtime exemption for employees 

employed in a bona fide executive capacity). 

II. 29 U.S.C. § 213(a)(l) (minimum wage and overtime exemption for employees 

employed in a bona fide administrative capacity). 

12. 29 U.S.C. § 213(a)(l) (minimum wage and overtime exemption for employees 

employed in a bona fide professional capacity). 

13. 29 U.S.C. § 213(a)(l) (minimum wage and overtime exemption for employees 

employed in a bona fide outside sales capacity). 

14. 29 U.S.C. § 213(a)(3) (minimum wage and overtime exemption for employees of 

seasonable amusement or recreational establishments). 
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15.29 U.S.C. § 213(a)(5) (minimum wage and overtime exemption for employees 

catching, harvesting, cultivating or farming fish, she!!fish, crustacia, sponges, 

seaweeds, or other aquatic forms of animal and vegetable life). 

16. 29 U.S.C. § 213(a)(6) (minimum wage and overtime exemption for certain employees 

of small farms). 

17. 29 U.S.C. § 213(a)(8) (minimum wage and overtime exemption for employees of 

small newspapers). 

18.29 U.S.C. § 213(a)(IO) (minimum wage and overtime exemption for switchboard 

operators for sma!! telephone companies). 

19. 29 U.S.C. § 213(a)(12) (minimum wage and overtime exemption for seaman on nonAmerican vessels). 

20. 29 U.S.C. § 213(a)(15) (minimum wage and overtime exemption for casual 

babysitters ). 

21. 29 U.S.C. § 213(a)(l5) (minimum wage and overtime exemption for domestic service 

employees who provide companionship services for individuals who, because of age 

or infirmity, are unable to care for themselves). 

22. 29 U.S.C. § 213(a)(l6) (minimum wage and overtime exemption for certain federal 

criminal investigators). 

23. 29 U.S.C. § 213(a)(l7) (minimum wage and overtime exemption for certain computer 

employees). 

24. 29 U.S.C. § 213(b)(l) (overtime exemption for employees subject to the Motor 

Carrier Act). 

25. 29 U.S.C. § 213(b)(2) (overtime exemption for employees of employers engaged in 

the operation of a rail carrier). 

26. 29 U.S.C. § 213(b)(3) (overtime exemption for employees of carriers subject to the 

Railway Labor Act). 

27.29 U.S.C. § 2!3(b)(5) (overtime exemption for outside buyers of poultry, eggs, cream 

or milk). 

28.29 U.S.C. § 213(b)(6) (overtime exemption for seaman). 

29. 29 U.S.C. § 213(b)(9) (overtime exemption for certain employees of small town radio 

and television stations). 
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30.29 U.S.C. § 213(b)(lO)(A) (overtime exemption for salesmen, partsmen and 

mechanics primarily engaged in selling or servicing automobiles, trucks or farm 

implements). 

31. 29 U.S.C. § 213(b)(IO)(B) (overtime exemption for trailer, boat and aircraft 

salesmen). 

32. 29 U.S.C. § 213(b)(ll) (overtime exemption for certain drivers and drivers' helpers 

making local deliveries and paid by the trip). 

33. 29 U.S.C. § 213(b)(l2) (overtime exemption for agricultural employees). 

34. 29 U.S.C. § 213(b)(l2) (overtime exemption for employees engaged in maintenance 

of ditches, canals, reservoirs or waterways used for storing water and which are 

operated on a non-profit or a sharecrop basis). 

35. 29 U.S.C. § 213(b)(l3) (overtime exemption for agricultural employees who work at 

livestock auctions during weekends). 

36. 29 U.S.C. § 213(b)(l4) (overtime exemption for small country grain elevators). 

37. 29 U.S.C. § 213(b )(15) (overtime exemption for employees engaged in the processing 

of maple sap into sugar or syrup). 

38. 29 U.S.C. § 213(b)(l6) (overtime exemption for certain employees engaged in the 

transportation of fruits or vegetables). 

39. 29 U.S.C. § 213(b)(l7) (overtime exemption for taxicab drivers). 

40. 29 U.S.C. § 213(b)(20) (overtime exemption for small fire and law enforcement 

agencies). 

41.29 U.S.C. § 213(b)(21) (overtime exemption for domestic service employees who 

reside in the household). 

42. 29 U.S.C. § 213(b)(24) (overtime exemption for house-parents of nonprofit 

educational institutions). 

43. 29 U.S.C. § 213(b )(27) (overtime exemption for employees of motion picture 

theaters). 

44. 29 U.S.C. § 213(b )(28) (overtime exemption for certain forestry employees). 

45. 29 U.S.C. § 213(b )(29) (overtime exemption for certain employees of amusement or 

recreational establishments located in a national park, national forest or on National 

Wildlife Refuge System land). 
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46. 29 U.S.C. § 213(b)(30) (overtime exemption for certain federal criminal 

investigators). 

47. 29 U.S.C. § 213(d) (minimum wage and overtime exemption for newspaper delivery). 

48. 29 U.S.C. § 214(d) (minimum wage and overtime exemption for students employed 

by their elementary or secondary school if such employment is an integral part of the 

regular education program provided by such school). 
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Appendix B 

Oxford Economics Study 
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To: The National Retail Federation 

From: Oxford Economics 

Date: August 18, 2015 

Re: State differences in overtime thresholds. 

This letter explores differences between states' prevailing wages pertinent to the 

Department of Labor's proposed new overtime exemption threshold. 1 1t follows up on Oxford 

Economics' July 17, 20151etter, which updated estimates from our paper "Rethinking Overtime: 

How Increasing Overtime Exemption Thresholds will Affect the Retail and Restaurant Industries" to 

reflect the DOL's proposaL 

DOL proposes to set a new overtime threshold at the national 40th percentile of earnings for 

salaried full-time workers in 2016, without any accommodation for !ower-wage industries or areas of 

the country. 2 The department has also proposed an automatic annual increase in the threshold by 

indexing it either to the CP!-U or the 40th percentile of nationwide full-time, salary earnings. Our 

previous letter raised several concerns with this proposal, including that the rule itself would drive 

lower-wage workers who are currently salaried to hourly status, thus affecting the distribution of 

salary compensation itself. In particular, indexing the threshold to the 401

h percentile has the 

potential to lead to a vicious cycle where one year's increase in overtime thresholds drives further 

increases the next year, irrespective of any underlying fundamental change in prices or labor market 

conditions. 

To illustrate this, 3 imagine that the lowest 40% of the salaried full-time wage distribution in 

2016 were converted to hourly status, so that only the top 60% of the original distribution of 

workers continued to be salaried, as in figure L If the new overtime threshold were set at the 40th 

percentile of this new distribution of salaried workers, as in figure 2, it would now be set at the 64th 

percentile of the original distribution. In 2016, for example, this 64th percentile would be set at 

approximately $1,400, as opposed to the 401

h percentile wage of $970. 4 

1 See http://www.dol.gov/whd/overt1me/NPRM2015. 2 See http://www.b!s.gov/cps/research series earnings nonhour!y workers.htm. "Salaried" here is used to 

mean, non-hourly paid workers. 3 Clearly, this is not meant as a literal prediction of what the new rule would mean, since some non-exempt 

workers still report salaried status in the Current Population Survey, and since the process would be iterative. 4 This uses our series approximating the DOL numbers, in which the 641

h percentile wage in 2014 is roughly 

144% of the 40th percentile wage ($933). We then scale this to DOL's forecast for the 40th percentile full-time 

salaried wage in 2016, $970. 
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At the proposed 

threshold level of 40% 

of full-time salaried 

workers 

Figure 1. 40th percentile wage before the rule. 

In year two using the 

40th percentile wage 

distribution 

2016 Full-Time Salaried Workers 

2017 Full-Time Salaried Workers 

I $970/week $1,400/week 

Figure 2. Hypothetical new 40th percentile cut-off of salaried wages in 2017 if all salaried workers 

below the 2016 cut-off were converted to hourly status. 

An additional concern with the DOL's proposal is that it applies a national 40th percentile 

wage figure across the United States as a whole. While in some states this wage is near the 40th 

percentile of salaried full-time wages, in relatively lower wage (and lower cost of living) states, it is 

much higher in the income distribution. 

!n this letter, we use our best approximation of the DOL's salary full-time wage series to: 

Calculate the percentile that the national401

h percentile of weekly wages for all full-time, 

salaried employees ($970 in 2016) actually represents in each state -which is the percentage of 

full-time salaried workers in each state and DC earning below the national401

h percentile wage; 

and 

Calculate what the 40th percentile salary full-time wage is in each state. 
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In addition to this, we use data from the American Community Survey to: 

Estimate annual salaries for entry level (between ages 18 and 27 inclusive) full~time workers 

(who may be paid on an hourly or salary basis), who are college graduates in each state. This 

reflects differences in costs of living and prevailing wages across states. 
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OJ~ D 

f',J 0 

State-level40111 percentile salaried wages 

This section uses microdata from the Current Population Survey {CPS) to explore differences 

between states in the 40th percentile of salary full-time wages. 5 Figure 3 be1ow5 shows what the 401

h 

percentile of salary full-time wages equates to in each state/ Relatively high-wage states are colored 

in yellow and relatively low-wage states in red. The red states will be most impacted by DOL's 

proposed increase in the salary threshold. 

40th Percentile Salary of Salaried Full-time Workers 

,.,..,-~-----, 

Figure 3. 401

h percentile salaried full-time wage by state. 

"The methotlo!ogy for constructing the .. Oxford best match" series is tliscusscd in greater detail in Otlr previous 

letter. Sta1iing with the 2014 monthly outgoing rotation groups in the CPS, we used the r~striction that pecrnrt"" 

2 to screen lOr non~hourly workers, and that pchrusl2:_ 35 OR (pchrusl =A AND pchrftpt = I) to screen for full~ 

time workers. Responses arc weighted by pworwgt and the small number of respondents under age 16 with 

\\age data arc excluded. The difference between data presented in this letter and those presented in that letter are 

that this letter takes percentiles of pooled data tl·om alll2 months. whereas the other letter took averages of 

monthly percentiles. This was done to prevent small sample sizes in statc~kvel estimates. The overall change in 

national estimates is minimaL 0 Th~ data :;cries fOr all the maps arc presented together in th~ tahl~ at the end of this letter. 7 The raw \vage for each state is sealed by the ratio ofDO!.·s national fOrecast 4010 percentile wage in 2016 

($970) to OxfOrd's best match natlonal4010 p~rcenti!e wage in 2014 ($942). 

4 
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Figure 4 shows what percentile the national 40th percent1le ($970 in 2016) actua!ly represents in 

each state. The percentile value depicted for each state is the percentage of that state's salaried fu!!~ 

time workforce that earns less than $970 per week (the national 40\!' percentile wage for such 

workers in 2016). Relatively high-wage states will thus have low percentile values and will be colored 

in yellow, and relatively !ow-wage and often lower cost of living states wl!l have hlgh percentile 

values and will be colored in red. These red states will be most impacted by the new overtime rules. 

Percent of Salaried Full·time Workers Earning Below $970/week 

Figure 4. Percentile of salaried full-time state wage distribution that nationa1401

h percentile wage 

($970) represents. 
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OXiFORD 

,r=·~ (~ t~~J (:) 

II. Entry~level college wages 

This section uses 2013 microdata from the American Community Survey8 to estimate entrylevel wages for college graduates by state in 2016.9 Specifically, entry-level jobs are identified by 

focusing on younger workers, those between 18 and 27 inclusive. College graduates by default 

includes anyone with an Associate's Degree or above (those with some college but no degree are 

excluded), although we also present data for those whose highest degree is an Associate's Degree, 

as well as for those whose highest degree is a Bachelor's Degree. We restrict attention to those who 

are currently employed and at work, and who reported working 35 hours or more per week on 

average, and 50 or more weeks in the preceding year. Data are median annual salaries for the 

preceding year. 10 

Figure 5 is a map of median annual entry-level wages for a!! those with a college degree.11 

Relatively high-wage states are colored in yellow and relatively low-wage states in red to match the 

presentation in the previous section. Figure 6 is an analogous map for those whose highest degree is 

an Associate's. Figure 7 is an analogous map for those whose highest degree is a Bachelor's. 

Generally, wages are higher for those whose highest degree is a Bachelor's than for those whose 

highest degree is an Associate's, but this is not necessarily the case (and is not the case in Alaska or 

Oregon) since workers 27 and younger with an Associate's Degree have more experience on average 

than workers in this same age group with a Bachelor's. In addition, in some states, especially when 

considering those whose highest degree is an Associate's, we run into issues with small sample sizes. 

This may be the case in Alaska, for example, where the median wage for such workers is $62,550. 

Sample sizes are generally not a problem in figure 5, which considers everyone with a college 

degree. 

8 ACS data \\as used rather than CPS duta because of its larger sample size. Note the difthence in reference 

year from the preceding section, ov.ing to 20! 4 ACS data not yet being available. Public Usc Microdata f()r 

2013 was obtained from https://www.census.gov/programs-surycvsiacs/data/pums.html. 

"Because of the context of the \\Ork, the year conversion is accomplished b) multiplying by the ratio of DOL's 

40th percentik l'u!l~time salaried wage series fOrecast in 20!6. $970, and DOL's calculated value in 2013.$921. 

To obtain original 2013 figurt:s, multiply th~.": presented figures by the reciprocal: 9211970. 10 Specifica!!y, we restrict age by (agep>=\8 AND agep<=27). We restrict tOr tUH-time status by (wkhp>=35). 

We restrict tOr those who are current!) employed and at work by (esr=l OR esr4) (l corresponds to civilian 

\\Orkers and 4 to military \YOrkers). We restrict for 50 or more weeks at \vork in the preceding year by (wkw=l ). 

We restrict tOr those with a b) whose highest degree is an Associate's 

by (sehl~'"'20) and for only those is a by (schl=2l ). Note that those with a 

college degree includes those with graduate degrees, but that this group is too small to report separately. The 

reported series, median weekly \vagcs, is the median oft wagp/52). AI! observations are weighted by pwgtp. 11 Note that figures 5·7 round annual wages to the nearest $50. The data table at the end of the document gives 

unrounded numbers. 
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Figure 5. Median entry-level wages for full-time workers with a college degree by state. 

Figure 6. Median entry-level wages for full-time workers whose highest degree is an Associate's by 

state. 
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Figure 7. Median entry~!eve! wages for ful!~time workers whose highest degree is a Bachelor's by 

state. 
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Ill. Data Table 

percentage 

of salaried 

40th full-time 

percentile workforce College 

salaried that earns graduate Associate's Bachelor's 

full-time <$970 per entry-level only entrywaoe week waqe level waOe I~~~~~!~~ Alabama $856 48.6% $35,440_ $28,143 $37,524 

Alaska -sf658 - 30.9% $38,567 $62,541 $38,567 

Arizona $979 37.7% $33,355 $29,186 $33,355 

Arkansas $803 53.8% $32,313 $27,101 -~ California $1,077 32.7% $41,694 $29,603 $42,215 

Colorado $1,019 35.1% $36,482 $26,476 $36 899 

Connecticut $1,175 27.6% $41,694 $31,062 $41,694 

Delaware $979 39.5% $31,896 $31,270 $33,355 

District of Columbia $1,176 24.5% $50,033 $31,270 $47,948 

Florida $815 50.3% $31,270 $25,537 $34,397 '' 

Georgia $882 45.4% $35,440 $25,329 ' $36,482 

Hawaii $823 48.7% $39,609 $31,270 $39,609 

Idaho $882 46.6% $30,228 $26,059 $26,059 

Illinois $979 39.0% $39,609 $26,684 $41,694 

~<Jiana $892 

~::~- $34,397 $28,143 -~ Iowa $979 $34,397 $31,270 $37,524 

Kansas $980 37.8% $36,482 $31,270 $37,524 

Kentucky $882 _1:~!o $31,270 $28,143 -~ Louisiana $784 51.0% $39,609 $31,896 $41,694 

Maine $960 40.0% $30,958 $26,059 $31,270 

Maryland $1,070 32.1% i $41,694 _$31,270 $41,694 

Massachusetts $1,175 27.3% $41,694 $33,355 $41,694 

Michigan $980 36.2%' $34,919 $26,059 $36,482 

Minnesota $1,048 32.1% $36,482 $31,270 $39,609 -- Mississippi $784 53.0%. $31,270 $23,661 $33,355 

Missoun $941 40.9% $33,355 $26,059 $35,440 

Montana $917 43.2% $31,270 $30,228 $31,270 

Nebraska $882 44.7% $33,876 $30,228 $35,440 

Nevada $847 46.3% $38,567 $32,313 $39,609 

New Hampshire $1,059 32.5% $36,482 $30,228 $36,482 

New Jersey $1,019 33.6% $42,736 $29,186 $43,779 

New Mexico $894 44.6% $33,355 $29,186 $33,355' 

New York $980 37.8% $41,694 $27,101 $43,779 

North Carolina $804 50.6% $33,355 $29,186 $34,397 

North Dakota $915 45.2% $36,482 $36,482 $36,482 

Ohio $917 42.0%' $35,440 $29,186 $36,482 

Oklahoma $784 54.7% $31,270 $26,059 $32,313 

Oreoon $1,019 34.5% $36,482 $36,482 $33,355 

Pennsvlvania $980 36.8% $37,524 $31,270 $39,609 
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$1,058 3L9% $37,~24 $31,270 

$866 47.3% $33,668 $31,270 

$843 46.3% $27,101 $26,059 

$823 50.6% $34,189 $27,309 

$882 46.0% $38,567 $27,101 

$882 44.0% $34,710 $27,101 

$979 39.2% $31,270 $28,143 

$1,038 33.3% $39,609 $31,270 

$1,137 28.7%' $36,482 $27,101 

$842 50.4%; $33,355 $29,186 

$1,000 35.7% $36,482 $31,270 

$980 37.1%' $37,524 $32,313 

10 
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Appendix C 

Request for Extension of Comment Period 
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CHAMBER OF COMMERCE 

OF THE 

UNITED STATES OF AMERICA 

RANDEL K. JOHNSON 

SEN lOR VICE PRESIDENT 

LAROR, lMMIGRAT!ON & EMPLOYEE 

BENEFITS 

Dr. David Weil, Administrator 

Wage and Hour Division 

U.S. Department of Labor 

200 Constitution Ave., .N.W. 

Washington, DC 20210 

July31,2015 

1615 H STREET, N.W. 

WASHISGTON, D.C. 20062 

202/463-5448 · 202/463-3194 FAX 

RE: Request for Extension of Comment Period for Proposed Regulation 

"Defining and Delimiting the Exemptions for Executive, Administrative, 

Professional, Outside Sales and Computer Employees" under 29 CFR Part 541 

(RIN1235-AA11), July 6, 2015. 

Submitted via electronic transmission: www.regulations.gov 

Dear Dr. Wei!: 

The proposed rulemaking on "Defining and Delimiting the Exemptions for 

Executive, Administrative, Professional, Outside Sales and Computer Employees" under 29 

CFR Part 541 (RIN1235-AA II suffers from several unclear aspects regarding the data 

compilation and analysis that was performed in support of the regulatory proposal. For the 

reasons detailed below, we request that the deadline for the comment period be extended by 

60 days to November 3, 2015. 

To facilitate meaningful comments, the Chamber needs to be able to do the following: 

• Replicate the analysis that was conducted by the Department; 

• Present other relevant tabulations and analyses using data compiled on the same basis 

as that presented in the Department's regulatory impact analysis; and 

• Understand the assumptions and calculations on which the Department bases its 

estimations of costs, transfers, and benefits of the proposal through obtaining more 

detail than is provided in the published material. 

Accordingly, to get the necessary answers to our technical questions regarding these 

data and analysis matters, we request a meeting with the Department's technical staff who 

conducted the data tabulation and analysis for the sole purpose of hearing and answering our 

technical questions. We expressly do not intend for this meeting to involve the presentation 

of arguments, alternatives, or proposals. We are interested solely in obtaining technical 

information that will allow us to proceed effectively and expeditiously to draft comments. In 

the alternative, we request the opportunity to submit detailed questions that will be answered. 
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We also note that the regulatory analysis published explains that the data tabulations 

used in the DeJ'artment's analysis were based on raw, confidential Bureau of Labor Statistics 

microdata files of individual responses to the monthly 2011 through 2013 Current Population 

Surveys, and that commenters cannot expect to replicate the results of the analysis on which 

the Department relied for its regulatory decisions by compiling and tabulating data from the 

available public use files of CPS microdata. Since this critical data is not available to the 

public, this represents a serious limitation on the public's right to comment on a proposed 

rule under the Administrative Procedure Act, and it represents a major change from past 

practice. In previous years, the Bureau of Labor Statistics, in order to safeguard its status as 

an accredited independent statistical agency, refused to conduct special data tabulations and 

analyses to support regulatory decision making. 

Therefore, we further request that the Department provide our analysts, and other 

analysts representing the interested public, with access to the secret BLS data files that were 

used for this proposed regulation so that we can ourselves verify the results presented by the 

Department and perform alternative tabulations and analyses to facilitate our comments. 

Alternatively, we request that the Department withdraw its notice of proposed rulemaking 

and analysis based on secret data and publish a transparent analysis based on the public use 

CPS microdata file that is available to all interested parties. 

Because the deficiencies in the published information provided in the regulatory 

docket have hindered our ability to comment on the proposal, we request that the comment 

period be extended by 60 days to accommodate the delay in providing us with the complete 

information needed prior to the time when the requested meeting occurs. 

We look forward to your expeditious response. 

Sincerely, 

Randel K. Johnson 

Senior Vice President 

Labor, Immigration and Employee Benefits 
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Appendix D 

2015 General Schedule Salary Table 
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Grade Step I Step2 

I $ 18,161 $ 18,768 

2 20,419 20,905 

3 22,279 23,022 

4 25,011 25,845 

5 27,982 28,915 

6 31 192 32232 

7 34,662 35,817 

8 38387 39 667 

9 42,399 43,812 

10 46,691 48,247 

II 51,298 53 008 

12 61,486 63,536 

13 73,115 75,552 

14 86,399 89,279 

15 101,630 105,018 

SALARY TARLE 2015-GS 

INCORPORATING THE l% GENERAL SCHimt)LE 1/'IOCREASE 

EFFF,CTIVE ,JANllARY 2015 

Annual Rates by Grade and Step 

Step3 Step 4 Slep5 Step6 Step 7 StepS 

$ 19,372 $ 19,973 $ 20,577 $ 20,931 $ 21,528 $ 22,130 

21.581 22,153 22,403 23,062 23 721 24,380 

23,765 24,508 25,251 25 994 26,737 27,480 

26,679 27,513 28,347 29181 30,015 30,849 

29848 30,781 31,714 32,647 33 580 34,513 

33,272 34,312 35,352 36,392 37 432 38,472 

36,972 38,127 39,282 40,437 41,592 42 747 

40,947 42,227 43,507 44,787 46,067 47,347 

45,225 46638 48,051 49,464 50,877 52,290 

49,803 51,359 52,915 54,471 56,027 57,583 

54718 56,428 58,138 59,848 61,558 63,268 

65,586 67,636 69,686 71,736 73,786 75,836 

77,989 80,426 82 863 85,300 87,737 90,174 

92,159 95,039 97,919 100,799 103,679 106,559 

108,406 1ll,794 ll5.182 118,570 121,958 125,346 

WITHIN 

GRADE 

~9 S~10 AMOUNTS 

$ 22,153 $ 22 712 VARIES 

25,039 25,698 VARIES 

28,223 28,966 743 

31,683 32,517 834 

35,446 36,379 933 

39512 40,552 1,040 

43,902 45,057 1,155 

48,627 49,907 I 280 

53,703 55,116 1,413 

59,139 60,695 U56 

64978 66,688 1,710 

77,886 79936 2,050 

92 611 95,048 2437 

109,439 112,3!9 2,880 

128,734 132,122 3,388 
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Appendix E 

Law360 Article 
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91412015 Final OT Rule May Go Beyond Salary Hike, - Say- i.Jiw360 

PortfoDo Medla,Jnc, 1 860 Broadway, 6th Floor 1 New York, NY 10003 I www.law360.com 

Phone: +1646 783 7100 1 Fax: +1 646 783 7161 t customerservlce@law360.com 

Final OT Rule May Go Beyond Salary Hike, 

Lawyers Say 

By Ben limes 

Law360, New York (June 30, 2015, 8:38PM ET) --The U.S. Department of Labor's newly 

proposed rule to expand overtime pay protections won plaudits from worker advocates, but 

some management-side lawyers warned that the final version could contain changes to the 

duties tests for overtime eligibility that weren't pitched when the proposal was unveiled 

Tuesday. 

The DOL's proposed rule called for hiking the minimum salary a worker must earn to 

qualify for a "white collar" exemption from the Fair Labor Standards Act's minimum wage 

and overtime pay requirements from $455 per week - or $23,660 annually - to $970 per 

week or $50,440 per year, and automatically updating the salary threshold to keep it from 

becoming outdated. 

Business groups and congressional Republicans were quick to criticize the proposed rule. 

But the presidents of the AFL-CIO, SEIU and United Steelworkers all Issued statements 

voicing support for the proposal, and employment lawyers who represent workers also said 

the proposal was a positive development. 

"It puts millions of workers in a position where they are clearly entitled to overtime, 

whereas before they were forced to litigate over it," said Outten & Golden LlP partner and 

class action group co-chair Justin Swartz. 

"The new salary level is a win for transparency and bright line rules, and spares 

practitioners and the courts from delving into the morass that is tlhe duties test as 

frequently," added Van Kampen Law PC founder Josh Van Kampen. 

After President Barack Obama directed Secretary of Labor Tom Perez to revise the DOL's 

regulations In March 2014, observers speculated that the DOL would Increase the salary 

threshold and might also make changes to the duties tests that factor Into overtime 

eligibility. 

In order to qualify for a white collar FLSA exemption, a worker must be paid a fixed salary 

that meets the minimum threshold, and his or her primary duty must be the performance 

of exempt work. 

The DOL said Tuesday it was not making specific proposals to modify the applicable duties 

tests but did ask for comment on whether the tests were working as Intended, and added 

that the agency was concerned that the current tests might allow for exemption of 

employees performing a "disproportionate amount" of nonexempt work. 

On Tuesday, former heads of the DOL's wage and hour division - the agency branch that 

issued the proposal - either expressed concern about, or were openly critical of, the way 

i'llp:h'Nww.kwl3eO."""IerUclesl6742811prlnl?&ecUon=tlaasatlla1 113 
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Q/412015 Final OT Rule May Go BeyQ"ld SaiBI'y Hike, t.aNyers Say· L.sw360 

the proposal dealt with the duties test question. 

Uttler Mendelson PC shareholder Tammy McCutchen, who headed the WHO from 2001 to 

2004, said some employers were worried the DOL would ambush them with changes to the 

duties tests In the final rule. 

"I have to share the concerns of the people in the business community, that I've talked to 

this morning, that the DOL will have changes to the duties test In the final rule that we have 

not had a chance to see and comment on," she said. 

"I am a little concerned about what may transpire with the duties test at the end of the 

day," added Ogletree Deakins Nash Smoak & Stewart PC shareholder Alfred Robinson, a 

former acting WHO director. "I am surprised that they were not more forthcoming In 

submitting proposed changes in duties tests, as opposed to kind of leaving a blank page and 

asking people to fill it ln. From my perspective, I think it would have been better to propose 

some changes to the duties test and have people comment." 

If sweeping changes to the duties test are part of the final rule that shouldn't come as a 

surprise to anyone, said Paul DeCamp, former head of the WHO and current leader of 

Jackson Lewis PC's wage and hour practice group. 

Courts typically give agencies a latitude on final regulatory language - under the "logical 

outgrowth" doctrine - as long as the regulated community has been kept apprised of the 

topics under consideration, according to DeCamp. 

Here, the DOL clearly believes it has laid the groundwork to revise the duties tests because 

it has announced the tests are in play, he added. 

"I don't think that the DOL is necessarily hiding the ball as much as being cowardly in its 

approach to rulemaking," DeCamp said. 

DeCamp noted that 15 months had elapsed since Obama called for the regulations to be 

revised, and that the agency had held numerous meetings with employers, workers and 

other stakeholders during that time. 

"This cake is not baked yet, and it is irresponsible for the department to leave so much of 

the regulatory landscape completely up in the air," said DeCamp. "If the department 

genuinely does not yet know which way it wants to go on the duties issue, the department 

should not have issued that NPRM. It is premature because the duties analysis is so critical 

to how one applies these exemptions." 

Not everyone thinks changing the duties tests in the final rule is in the cards. Swartz said it 

was possible but unlikely, while Van Kampen said the DOL was "concentrating Its fire on the 

new standard salary test." 

However, the proposal released Tuesday asked for input on several questions related to the 

duties tests. 

"While the department is not proposing specific regulatory changes at this time, the 

department is seeking additional Information on the duties tests for consideration in the 

final rule," the proposal said. 

The questions posed included what, if any, changes needed to be made, and whether the 

DOL should look at California's approach as a model. 

In addition to meeting salary requirements, California requires workers to spend more than 

SO percent of their time on tasks deemed exempt from minimum wage and overtime 

htlp:liWwwJtiN360.cornlarUdesl674261fpr!nl?sectlon=dassacllon 
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Float OT Rule May Go Beycn:t Salary Hike. Lawyers Say· lBw360 

requirements. Federal regulations, however, look at a worker's "primary duty" to assess if 

they qualify for one of the FLSA white collar exemptions. 

"If the DOL moves to a California standard for the duties test, the first thing I'm going to do 

is go out and hire about 100 new associates to help me defend all the new lltigatlon that 

our firm's clients will face," DeCamp said, 

Businesses concerned about the impact of the new regulations should make their voices 

heard during the comment period and bring up potential changes to the duties tests, even 

though no specific moves have been proposed, according to attorneys. 

The DOL said in an email Tuesday that "while no specific changes are proposed for the 

duties tests, the NPRM contains a detailed discussion of concerns with the current duties 

tests and seeks comments on specific questions regarding possible changes. The 

Administrative Procedure Act does not require agencies to include proposed regulatory text 

and permits a discussion of issues instead. • 

--Editing by John Quinn and Emily Kokoll. 

All Content© 2003M20l5, Portfolio Media, lnc. 

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Appendix F 

February 11, 2015 Letter to Secretary Perez 
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CHAMBER OF COMMERCE 

OF THE 

UNITED STATES OF AMERICA 

RANDEL K. JOHNSON 

SENIOR VICE PRESIDENT 

LABOR, IMMIGRATION & EMPLOYEE 

BENEFITS 

The Honorable Thomas Perez 

Secretary 

United States Department of Labor 

200 Constitution Avenue, N.W. 

Washington, DC 20210 

Dear Secretary Perez: 

1615 II STREET, N.W. 

WASHINGTON, D.C. 20062 

202/463-5448 

February 11,2015 

MARC D. FREEDMAN 

EXEC. DIRECTOR, Li\FWR LA\1;·' POLICY 

LABOR, IMMIGRATION & EMPLOYEE. 

BENEl-'!TS 

We, and the Chamber members who were able to participate, appreciated the opportunity 

to meet with you and discuss the possible revisions to the FLSA overtime pay regulations as well 

as the Wage and Hour Division's enforcement and compliance efforts. With apologies for the 

delay, we wish to follow-up on several of these issues raised during the "listening session" 

meeting with Chamber members. 

The U.S. Chamber of Commerce is the world's largest business organization representing 

the interests of more than 3 million businesses of all sizes, sectors, and regions. Our members 

range from mom-and-pop shops and local chambers to leading industry associations and large 

corporations. Weighing heavily on the minds of our members are the pending revisions to the 

Department of Labor's "white collar" overtime exemption regulations at 29 C.F.R. Part 541. 

While we recognize DOL has statutory authority to define and delimit the Section !3(a)(I) 

exemptions through regulation, 1 undertaking any regulatory change should be done prudently 

and only after careful consideration of any potential benefits justifying the likely costs. The 

premise of rampant non-compliance by employers, while convenient rhetori'c, is patently false. 

Our members- and the vast majority of employers- go to great lengths to comply with the law. 

There is no dispute that prior to the 2004 white collar regulations employers (including 

the DOL itself) struggled to interpret the regulations and arrive at a correct determination.2 The 

2004 regulations sought to bring greater clarity to the regulations. Changing these regulations 

once again, just as the dust is settling, and in the ways that are apparently being contemplated 

will not bring greater clarity, but will, instead, unsettle years of case law and serve only to further 

enrich plaintiffs' class action lawyers. 

1 DOL's regulatory authority as to computer employees was limited by Congress' enactment of Section 13(a)(l7) of 

the Act. Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and 

Computer Employees ("Preamble"), Federal Register, Vol. 69, No. 79,22158-9 (April23, 2004). 2 "[W]orkplace changes over the decades and federal case law developments are not reflected in the current 

regulations ... The existing duties tests are so confusing, complex and outdated that often employment lawyers, and 

even Wage and Hour Division investigators, have difficulty determining whether employees qualify for the 

exemption." Preamble at 22122. 
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The following points highlight the concerns of Chamber members and provide 

suggestions on how the Department can move forward with changes to these regulations with the 

least amount of disruption, and minimize the complications. In addition, we endorse the letter 

sent to you by the HR Policy Association on August 20,2014. We believe this letter does an 

excellent job of explaining the current FLSA landscape and suggesting constructive changes the 

Department could pursue to improve compliance with the law, and ultimately, employees being 

compensated appropriately. 

I. ASSESSING THE COSTS AND BENEFITS OF REGULATORY 

ALTERNATIVES 

Given the profound effect the contemplated changes will have, we urge the Department 

to adhere closely to the guidance and instructions for developing regulations contained in 

Executive Orders 12866 and 13563 issued by Presidents Clinton and Obama, respectively: 

• "assess all costs and benefits of available regulatory alternatives, including the alternative 

of not regulating;"3 

propose a regulation "only upon a reasoned determination that its benefits justify its 

costs;"4 

• "tailor its regulations to impose the least burden on society;"5 

• "select, in choosing among alternative regulatory approaches, those approaches that 

maximize net benefits;"6 and 

• "use the best available techniques to quantify anticipated present and future benefits and 

costs as accurately as possible."7 

We also expect that any proposed regulation will be sent to the Office oflnformation and 

Regulatory Affairs (OIRA) for review as specified by E.O. 12866. Such a regulation would 

likely qualify as a "significant regulatory action" as that term is used in the Executive Order 

based on its economic impact and possible effect on competition and jobs.8 

As the executive orders instruct, the Department should identify a range of distinct 

regulatory alternatives, including the alternative of leaving the current set of regulations in place. 

Regardless of the alternatives, the Department must avoid relying on mere, anecdotal reporting 

to justify changes and instead establish an accurate and complete picture of the current regulation 

baseline which includes: the numbers of employees classified as exempt or non-exempt under 

existing rules in each affected industry and occupation; weekly hours worked by employees in 

each classification category including hours worked that would qualify for overtime 

compensation under the various alternatives, wage rates; and annual earnings. 

3 Executive Order 12866, Section !(a). 4 Executive Order 13563, Section !(b). 5 Ibid. 

6 Ibid 

7 Ibid., Section l (c). 

'E.O. 12866, Section 3(f). 

2 
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Currently available, routinely collected data sources, such as the Current Population 

Survey and the BLS Current Employment Statistics program do not provide adequate 

information regarding the actual FLSA overtime classification practices of employers, actual 

duties of employees within broad occupational titles, or hours and earnings information 

(particularly on a regionalized and local basis). Instead, to fulfill the Executive Order directions 

to "use the best available techniques to quantify benefits and costs", the Department should 

utilize scientific statistical sampling, employer surveys, controlled experiments, empirical 

interview techniques, and relevant administrative records to establish an accurate baseline from 

which to measure current classifications, hours, and earnings practices from which it can 

estimate the likely impacts of various alternative proposals. All efforts should be made to utilize 

the best and most accurate data, not just the anecdotal examples that create the best sound bite. 

The Part 541 regulations were significantly updated just over I 0 years ago. Thus, the 

cost of the uncertainty created by any drastic changes to human resources policies which are still 

stabilizing from the implementation of the current regulations must be considered. Settlements 

of FLSA lawsuits should not be used to support findings of misclassification or justify revisions 

to the existing regulations. In fact, an increase in litigation- and particularly in settlementsmay be considered an element of the expected economic impact of regulatory change. 

Additional economic costs are endured by the entire labor market as both employers and 

employees learn new rules, analyze existing compensation practices, measure time spent in 

different types of work activities, restructure work places and compensation practices, adjust 

budgets, undergo additional training, experience temporary slowing of hiring processes and work 

flows, and are subject to increased recordkeeping requirements. 

Given these significant and complex considerations, we ask that before undertaking a 

new ru!emaking the Department first examine the experience and costs associated with the prior 

changes to develop a more accurate estimate ofthe likely costs, detriments and benefits of any 

proposed new changes to the regulations. While the President has directed DOL to issue 

proposed regulations, the potential scope and impact of those regulations are entirely left to the 

discretion of the Department.9 We are convinced that after an objective and thorough review of 

the burdens and complications associated with radical changes to the Section 541 regulations, the 

Department will favor a modest and limited approach to these regulations. 

II. REVISING THE PART 541 OVERTIME EXEMPTION REGULATIONS 

As an initial matter, the Chamber requests that the Department allow the public no less 

than 120 days to file comments to any Notice of Proposed Rulemaking. Any proposed changes 

to the Part 54! regulations will impact a vast cross section of employers. The Department will 

be best served by public comments that examine obvious and not obvious consequences ofthe 

proposed changes thoroughly. Employers will need to provide facts and data on current business 

practices, compensation practices and how both employees and employers will be impacted. 

9 The Presidential Memorandum to the Secretary of Labor of March 13, 2014 merely directs him to "propose 

revisions to modernize and streamline the existing regulations," and to "consider how the regulations could be 

revised to update existing protections consistent with the intent of the Act; address the changing nature of the 

workplace; and simplify the regulations to make them easier for both workers and businesses to understand and 

apply." 
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Business groups like the Chamber will need to work with their memberships to develop this 

information. A comprehensive and vigorous public comment process cannot be accomplished in 

less than 120 days. 

If a final regulation is issued, the Chamber also requests that the Department provide-at a 

minimum-an implementation period of at least one year. This is less than was provided for the 

final companionship exemption rule, which impacted just a small subset of the employers 

expected to be touched by any proposed Part 541 revisions. 10 Although more than the fourmonth effective date for the 2004 Part 541 revisions, employers have reported that 

implementation in 2004 actually took much longer. Employers will need to evaluate whether 

each individual employee meets the changed exemption requirements. As DOL well knows, 

depending on a job title or job description is not sufficient in evaluating exemption status. 

Rather, employers need to determine actual and specific job duties performed by each currently 

exempt employee, individually, which requires interviewing employees and their supervisors. 

Even after that evaluation, months of additional work will be required to transition an employee 

from exempt to non-exempt, which includes: determining changes to wages (same salary, lower 

salary, hourly), incentive compensation and benefits; ensuring payroll systems are ready to 

properly calculate the regular rate; implementing new timekeeping systems and policies for 

employees who may have never tracked their work time before; training of newly non-exempt 

employees and their supervisors on what is "work" that they must track; and implementing new 

systems to replace employees' use of mobile devices that will no longer be allowed due to the 

inability to track work activities out of the workplace. 

Moreover, we request that following the implementation period, the Department institute 

a time-limited non-enforcement policy while undertaking a substantial and substantive 

compliance assistance program focused on teaching employers- both on the new legal 

requirements for exemption and how those requirements apply to real jobs in the real world. 

Such a compliance assistance program must include the Wage and Hour Division restoring the 

Opinion Letter process to respond to requests from employers regarding whether particular jobs 

and tasks continue to meet the tests for exemption under the revised regulations. 

Finally, we request proposing a safe harbor mechanism, to provide relief to ethical 

employers who unwittingly commit a wage or hour violation under a good-faith belief that they 

were complying with the law. 

A. Salary Level 

In determining the appropriate salary level, the DOL should be mindful that the purpose 

of the salary level test is to simplify "enforcement by providing a ready method of screening out 

the obviously nonexempt employees", the addition of which "furnishes a completely objective 

and precise measure which is not subject to differences of opinion or variations in judgment." 11 

10 The Department suspended enforcement until July I, 2015 and indicated that it would exercise prosecutorial 

discretion for an additional six months after that. In the interim the regulation has been vacated by the U.S. District 

Court for the District of Columbia in Home Care Association of America v. Wei/ which the Department has 

indicated it is appealing. 11 See Report and Recommendations on Proposed Revisions of Regulations, Part 541, by Harry Weiss, Presiding 

Officer, Wage and Hour and Public Contracts Divisions, U.S. Department of Labor (June 30, 1949) ("1949 Weiss 

Report") at 8-9. 

4 
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Salary requirements also fumishp a practical guide to the inspector as well as to employers and 

employees in borderline cases."1 

Therefore, a salary level sufficient to screen out the "obviously" non-exempt employees 

must not be set at a bar so high as to exclude employees who comfortably meet the duties test for 

an exemption. Instead, "[r]egulations of general applicability such as these must be drawn in 

general terms to apply to many thousands of different situations throughout the country." 13 

However, it has long been recognized that "such a dividing line cannot be drawn with great 

precision but can at best be only approximate." 14 

The Department should, therefore, consider the impact of any increase the salary level 

will have in low-cost living areas such as the South and Mid-West, as well as rural areas. 

Moreover, DOL should not depart from the long established precedent of exemptions for certain 

positions. Retail managers and those in the service sector have long been regarded as exempt 

employees as evidenced by the fact that there was even a higher tolerance for non-exempt work 

for managers in the retail sector. Profit margins, salary levels, and staffing patterns vary widely 

across industries and different parts of the country. DOL needs to study these variations 

carefully. To accomplish this, the Department should study the best available salary data-by 

using scientific statistical samplings, employer surveys, and relevant administrative records to 

establish the accurate baseline for current classification and earnings practices. This analysis 

should consider industry, job, geographical location, and rural versus urban areas. Upon 

completion, the salary level should then be set below the average salary dividing line between 

those obviously non-exempt and obviously exempt positions. This is the methodology used by 

the Department when setting the salary-basis level in 1940, 1949, 1958, 1963 and 2004. 

Finally, the Department should not adopt automatic increases to the salary level based on 

an inflationary index. Metropolitan statistics- which are what inflation measures are tied towholly fail to account for differences in the cost of living and salary levels between metropolitan 

versus rural areas. Neither the minimum wage nor the Part 541 salary level has ever been tied to 

automatic increases, despite many proposals to do so, and there is no foundation for establishing 

one now. Nor does the FLSA, itself, provide authority for adopting an inflation index. Indeed, 

in an analogous context, one feature of the proposals to increase the minimum wage endorsed by 

the President and many Congressional Democrats is to index the minimum wage to inflation 

which suggests that even if the Secretary has the authority to "define and delimit" the statutory 

exemptions, this authority does not go so far as to include indexing the salary threshold to 

inflation. 

B. Duties Tests 

In discussing possible revisions to the current regulatory scheme, the idea of replacing the 

Part 541 qualitative "primary duty" test with a quantitative test is a continuing theme. The 

12 Ibid; See also, Report and Recommendations on Proposed Revisions of Regulations, Part 541, under 

the Fair Labor Standards Act, by Harry S. Kantor, Presiding Officer, Wage and Hour and Public Contracts Divisions, 

U.S. Department of Labor (March 3, 1958) ("1958 Kantor Report") at 2-3 (salary levels "furnish a practical guide to 

the investigator as well as to employers and employees in borderline cases, 

and simplify enforcement by providing a ready method of screening out the obviously nonexempt employees"). 13 1949 Weiss Report at 8-9. 14 1949 Weiss Report at II. 
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Chamber strongly urges the Department not to adopt such a quantitative test. Doing so would 

not solve any of the perceived problems, but would instead create tremendous burdens upon the 

regulated community. As we have seen in jurisdictions that have adopted quantitative tests, such 

measures do not decrease litigation or uncertainty over classifications. 15 In its place, regardless 

of any effort to regulate around such ambiguities, the central issue will always remain what isand is not- exempt work. This will incentivize the plaintiffs' bar to systematically attack an 

employee's classification. Employers will be required to wade through the hour-by-hour- and 

in some cases- minute-by-minute tasks of their employees, in defending their classification 

decisions. Such a measure represents the wholesale abandonment of70 years of case law, 

setting up potential challenges and further litigation. 

Equally troubling are the additional costs that will be borne by every employer as they 

attempt to time-test employees for time spent in activities. In order to ensure the proper 

classification, employers would need to put into place systems or other reporting or monitoring 

measures for all of their employees. These systems would have to track not just hours worked, 

but the specific quantity oftime spent performing exempt versus non-exempt tasks. Additionally, 

at a minimum, each category of employee and each employee would have to be evaluated 

separately. Time studies ofthis kind, which would be necessary to defend against litigation, can 

easily cost up to $I 00,000 which would be a significant burden for many employers. Such time 

testing may require new technology and systems that are not readily available. It also may 

require periodic retesting, thereby creating a recurring -as opposed to a one-time- cost. 

Adopting such a measure is imprudent and would prove unduly burdensome and ineffective, and 

merely create more confusion. 

1. Executive Exemption 

During our meeting, you expressed concerns with the current "concurrent duties" test and 

asked our view on possible revisions to the test. We are predisposed to leaving it untouched. 

However, to the extent you are committed to making changes, we have a few suggestions which, 

in whole or in part, may address your stated concerns: 

1. The current concurrent duties test set forth in 29 C.P.R.§ 54I.l06 can be revised to 

delineate additional specific managerial duties that the manager, supervisor or assistant 

manager must also be performing before the rule would apply. 

2. The Department could consider reinstituting a version ofthe pre-2004 "sole-charge" test, 

which permitted employers to classify one manager (who otherwise meets the duties test 

for the executive exemption) as exempt during each shift. This test is premised upon the 

commonsense notion that someone must be in charge, and therefore responsible for all 

management duties, during the entire time a store or business is open regardless of what 

other duties they may from time to time have to perform. Inclusion of the "sole-charge" 

15 The obvious example is California. We have heard from our members in California that this provision has created 

uncertainty about what an employer expected an employee to be doing and whether the employee was doing the 

specific job assigned. What sounds like a straightforward concept quickly becomes impractical when seen in the 

context ofthese expectations. Furthermore this provision, as predicted, has become a major source of class action 

litigation further draining employer resources and undermining the ability of employers to avail themselves of these 

statutory exemptions with confidence. 

6 
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test could be used in addition to any other employees at the facility that otherwise meet 

the executive exemption test. 

2. Administrative Exemption 

The Chamber appreciates the need for clarity; however we do not believe that regulations 

are a forum tore-litigate old arguments. We urge the Department not to revisit positions on 

which hundreds of millions of dollars in litigation costs have already been spent and which are 

well-settled by the courts. Positions such as pharmaceutical representatives, loan officers, and 

claims adjusters have been adjudicated. To attempt to overturn court decisions achieved in 

litigation through regulations would create massive uncertainty and instability, in direct 

contradiction to what the stated goal of this rulemaking. 

3. Computer Employee Exemption 

As noted in the 2004 Preamble, the Department's authority to revise the primary duties 

that must be performed by exempt computer employees is limited by the language of 

Section 13(a)(l7) of the Act. However, the Chamber would welcome the opportunity to work 

with the Department and Congress to develop a legislative solution to the statutory language that 

has not kept pace with developments in the computer industry. 

III. ENFORCEMENT AND COMPLIANCE 

The Chamber recognizes that to have effective regulations, the Department must-at the 

same time-have effective enforcement and mechanisms to drive compliance. The Chamber 

believes that the Department can improve its efforts in both arenas. 

The Wage and Hour Division's (WHD) approach to FLSA enforcement has become 

increasingly focused on merely punishing the employer rather than seeking balanced 

resolutions-regardless of whether the agency is investigating an employer with a long history of 

violations, or an employer with no prior violations; and regardless of whether there is a clear 

violation or ambiguity in allegations. In order to achieve and maintain regulatory compliance, 

WHD must be willing to provide employers with meaningful compliance assistance and to 

support those employers who evaluate their wage and hour practices and seek to correct any 

mistakes with DOL supervision of any back wage payments. Instead, WHO's current practice is 

to offer negligible compliance assistance, refuse to supervise voluntary back wage payments, and 

to aggressively pursue maximum penalties regardless of the employer's compliance history. 

This position helps no one, least of all the employees. 

Further, utilizing certain investigatory tactics- conducting unannounced investigations, 

threatening subpoena actions if overbroad documents requests are not responded to within 72 

hours, and imposing civil money penalties and liquidated damages in almost every case- have 

impeded resolution and hindered cooperation. In many cases this has forced employers to 

contest these actions which only delays employees receiving their compensation. While the 

WHD should punish bad-faith employers who willfully and/or repeatedly violate the law, not 

every employer with a wage and hour violation should be handled the same way. Such an 

approach is counter-productive for good-faith employers who express a willingness to take 

corrective measures or redress mistakes. Without incentives for voluntary remediation, and 

7 
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given WHO's limited investigation resources, an all-stick-no-carrot approach cannot effectively 

accomplish the agency's key mission to ensure our nation's employees are paid in compliance 

with the FLSA. 

To have an effective enforcement program, an agency must have an effective compliance 

assistance program that provides employers with meaningful assistance regarding the compliance 

challenges posed by the FLSA in an era of rapidly changing technology. Recently, WHO's 

compliance assistance efforts appear focused primarily upon assisting employees and their 

advocacy groups in pursuing litigation against employers rather than helping employers achieve 

compliance through voluntary means short of litigation. 

WHO should develop programs to recognize and reward good faith employers seeking to 

improve their compliance with the FLSA. We recommend: 

• A Voluntary Settlement Program where employers who self-disclose a violation to WHO 

can agree to pay 100% of back wages, but are not subject to a third-year of willfulness 

back wages, liquidated damages or civil money penalties, and are issued WH-58 forms to 

obtain employee waivers; 

Awards for developing and implementing best practice compliance programs. 

At the same time, the regulated community would be best served by the WHD 

reinstituting the 50-year practice of issuing Opinion Letters, providing an analysis of the specific 

facts present. Other agencies provide this level of guidance to employers and the agency will be 

fulfilling its mission by continuing the practice. Such efforts provide an invaluable resource to 

employers in assisting them to comply with the law. 

IV. CONCLUSION 

The anticipated Department of Labor regulations altering how the statutory exemptions to 

overtime compensation are applied threaten to upend years of settled law, create tremendous 

confusion, and have a significantly disruptive effect on millions of workplaces. Such a 

rulemaking should only be undertaken, if at all, after a thorough examination of the data 

describing the number of employees and workplaces that would be impacted, and the true nature 

and breadth of that impact. It should not be undertaken based on isolated or anecdotal examples 

of violations under the current regulatory regime. Included in the costs that must be accounted 

for ought to be those associated with the increase in litigation that such new regulations will 

inevitably create. 

As we made clear during our meeting with you, there will also be significant negative 

impacts on employees who are forced to be reclassified from exempt to non-exempt. The 

Department must quantify and examine these closely before moving forward with any proposed 

regulation. 

Finally, the WHO's approach to enforcement and compliance assistance must be revised. 

Any changes in these regulations must be accompanied by comprehensive compliance assistance 

including restoring the practice of issuing Opinion Letters to help employers understand how 

these regulations will apply to specific fact patterns. Similarly, the Wage and Hour Division's 
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approach to enforcement should be reexamined to distinguish those cases with egregious 

violations from those where the employer has made a good-faith error. Any changes to the 

Section 541 regulations will undoubtedly generate many of the latter cases. 

We appreciate your consideration of these matters and the opportunity we had to meet 

with you. If we can provide you with any additional information or resources, please do not 

hesitate to contact me. 

Randel K. Johnson 

Senior Vice President 

Labor, Immigration & Employee Benefits 

Of Counsel 

Tammy D. McCutchen 

Littler 

1150 17th Street, NW 

Suite 900 

Washington, DC 20036 

Sincerely, 

9 

Marc Freedman 

Executive Director of Labor Law Policy 

Labor, Immigration & Employee Benefits 
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Appendix G 

Additional Tables from CPS Survey Data 
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Source: Current Population Survey, Public Use Microdata File, Merged 12 

months outgoing rotations (Earner Study) supplement. 
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Source: Current Population Survey, Public Use Microdata File, Merged 12 

months rotations {Earner Study) supplement. 

2 
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Earners 58.0% 816 4,627,008 

All 

30.7% 707 

Source: Current Population Survey, Public Use Microdata File, Merged 12 

months outgoing rotations (Earner Study) supplement. 

3 

54.3 

52.7 
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body and related 

glass installers and 

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correctional treatment 

110 

Social and human service 

111 assistants 

Miscellaneous community and 

social service specialists, 

including health educators and 

health workers 

40.1 

41.3 

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picture camera operators and 

148 editors 

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43.2 44.5 
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230 

Miscellaneous entertainment 

231 attendants and related workers 

Embalmers and funeral 

232 attendants 

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Door-to-door sales workers, 

news and street vendors, and 

260 related workers 

Sales and related workers, all 

261 other 

37 

40.7 44.3 

41.7 45.2 

40.0 45.8 

40.9 43.1 

39.7 45.1 

40.9 42.6 
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40.4 39.7 

40.0 44.4 

Miscellaneous construction and 

related workers, including 

347 installers 40.1 54.9 

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50.8 58.7 

42.8 46.4 

40.5 41.4 

40.9 44.4 

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42.1 49.7 

41.8 41.8 

40.7 42.3 

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40.4 

41.5 44.0 

42.2 44.4 

41.8 40.0 

389 electromechanical assemblers 41.2 41.6 

Engine and other machine 

390 assemblers 44.9 42.3 

Structural metal fabricators and 

391 fitters 42.0 50.0 

Miscellaneous assemblers and 

40.6 43.7 

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41.0 47.2 

42.1 43.3 

Extruding and drawing machine 

setters, operators, and tenders, 

400 metal and 43.5 38.0 

Rolling machine setters, 

operators, and tenders and 

forging machine setters, 

operators, and tenders, metal 

401 and 40.7 0.0 

Cutting, punching, and press 

machine setters, operators, and 

land 41.9 41.4 

Grinding, lapping, polishing, and 

buffing machine tool setters, 

operators, and tenders, metal 

403 and 42.0 40.0 

Lathe and turning machine tool 

42.0 41.9 

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Textile knitting and weaving 

machine setters, operators, and 

422 tenders 

46 

42.2 42.7 

40.6 47.6 

43.0 55.0 

41.6 41.8 

40.0 0.0 

39.1 43.0 

42.7 40.0 

40.0 0.0 
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43.0 40.0 

41.2 40.0 

40.1 41.8 

42.8 43.1 

40.9 44.3 

41.1 46.3 

43.1 43.4 

40.8 41.9 
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Exhibit C 
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Wage and Hour Division 

U.S. Department of Labor 

200 Constitution A venue, NW 

Washington, DC 20210 

NFIB 

The Voice of Small Business: 

September 3, 2015 

RE: RIN 1235--AAll; Defining and Delimiting the Exemptions for Executive, 

Administrative, Professional, Outside Sales and Computer Employees 

These comments are submitted for the record to the Wage and Hour Division of the U.S. 

Department of Labor (DOL) on behalf of the National Federation oflndependent Business 

(NFIB) in response to the notice of proposed rulemaking regarding "Defining and Delimiting the 

Exemptions for Executive, Administrative, Professional, Outside Sales and Computer 

Employees" published in the July 6, 2015 edition of the Federal Register. 

NF!B is the nation's leading small business advocacy association, representing members in 

Washington, DC, and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan 

organization, NFIB's mission is to promote and protect the right of its members to own, operate, 

and grow their businesses. NFIB represents about 350,000 independent business owners who are 

located throughout the United States. 

NFIB believes that the proposed rule will have a substantial negative impact on small businesses 

and their employees. Accordingly, NFIB urges DOL to withdraw the proposed rules for the 

following reasons. First, the proposed salary threshold increase will not result in increased pay 

for employees of small businesses, but instead will result in the limiting of employee hours and 

diminished career growth opportunities. Second, while no changes to the duties test were 

proposed, DOL should not adopt a new duties test in the final rule based simply on feedback 

provided in the comment period. DOL should propose specific language on which the public can 

comment. The reasons are explained further below. 

Summary of the proposed rule 

The Fair Labor Standards Act (FLSA) generally requires covered employers to pay their 

employees overtime premium pay of one and one-halftimes the employee's regular rate of pay 

for all hours worked over 40 in a workweek. However, there are a number of exemptions from 

the FLSA's minimum wage and overtime requirements. Section 13(a)(l) of the FLSA, codified 

at 29 U.S.C. 213(a)(1), exempts from both minimum wage and overtime protection "any 

employee employed in a bona fide executive, administrative, or professional capacity ... or in the 

capacity of outside salesman." The FLSA does not define the terms "executive," 

"administrative," "professional," or "outside salesman." 
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NFIB Comments on RIN 1235-AA II September 3, 2015 

DOL has consistently used its rulemaking authority to define and clarify the section 13(a)(l) 

exemptions. Since 1940, the implementing regulations have generally required each of three tests 

to be met for the exemptions to apply. First, the employee must be paid a predetermined and 

fixed salary that is not subject to reduction because of variations in the quality or quantity of 

work performed (the "salary basis test"). Second, the amount of salary paid must meet a 

minimum specified amount (the "salary level test"). Third, the employee's job duties must 

primarily involve executive, administrative, or professional duties as defined by the regulations 

(the "duties test"). 

In this proposed rule, DOL proposes changes only to the salary level test. Currently, the 

minimum salary that a worker must receive is $455 per week ($23,660 annually). The proposal 

seeks to more than double that amount to $970 per week ($50,440 annually). In addition, DOL 

seeks- for the first time to automatically increase the salary threshold at either the 401

h 

percentile of all salaried wage earners, or at a rate equivalent to the Consumer Price Index for All 

Urban Consumers (CPI-U). No timeframe for how frequently this increase will take place is 

proposed, however. 

While DOL does not propose a specific change to the third test- the duties test- the agency 

seeks feedback on if it should be revised, and if so, in what manner. 

Negative impacts of proposed salary threshold increase on small businesses 

The proposed rule represents an unprecedented effort by DOL to vastly expand non-exempt 

status to workers. It is unprecedented because of its ambition to automatically make non-exempt 

anyone who makes less than the 40'h percentile of all salaried wage earners in the United States. 

By comparison, the current threshold- promulgated in 2004- was set at roughly the 20th 

percentile of salaried employees in the South region and in the retail industry. The 2004 rule 

recognized that the cost of living varies in different parts of the country and adjusted 

accordingly. This proposed rule makes no such effort. The proposed rule is also unprecedented 

because for the first time the salary threshold will automatically increase going forward. 

The proposed rule has thus far been marketed by the administration as win for workers because it 

will ensure that employees are paid "fairly." Unfortunately, the true consequences of this 

proposed rule will be greater costs and burdens on small businesses and less flexibility, benefits, 

and even pay for most of the workers it purports to benefit. The proposed changes will have a 

negative impact on employee morale, which will in tum hurt the small business's quality, 

customer service, and reputation. 

Increased labor and regulatory compliance costs 

According to DOL's initial regulatory flexibility analysis (IRF A), small businesses will face 

nearly $750 million in new costs in the first year if the rule is finalized as proposed. These costs 

are made up of $186.6 million in costs associated with implementing the rule and $561.5 million 

in additional wages that will now be paid to workers 1

• Unfortunately, these estimates 

simultaneously underestimate the compliance costs to small businesses and overestimate the 

transfers to employees. 

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NF!B Comments on R!N !235-AAll September 3, 2015 

First, the IRF A underestimates compliance costs because it does not take into account business 

size when estimating the time it takes to read, comprehend and implement the proposed changes. 

As an example, DOL "estimates that each establishment will spend one hour of time for 

regulatory familiarization." This assumption erroneously disregards a basic reality of regulatory 

compliance- the smaller the business, the longer and more expensive it is to comply. Numerous 

studies have identified that federal regulatory compliance disproportionately affects small 

businesses. The most recent one, performed in 2014 for the National Association of 

Manufacturers, found that businesses with fewer than 50 employees spent 30 percent more per 

employee per year than their larger counterparts2

• This study was performed by the same authors 

that have previously done similar studies for the U.S. Small Business Administration's Office of 

Advocacy. 

Common sense also dictates that small businesses are impacted disproportionately from larger 

ones. Primarily, this is because small companies typically lack specialized compliance personnel. 

Typically, the duty of compliance officer falls to the business owner or the primary manager. 

These individuals are generally not experts in wading through regulatory text, so familiarization 

time is greater than for large companies. Alternatively, a small business could hire an outside 

expert to devise a compliance plan, but this cost will also be significantly greater than what a 

firm with in-house compliance staff would endure. 

In this case, complying with the rule requires far more than simply looking at a salaried 

employee's weekly wages. This is just one piece of the puzzle. If an employee is currently 

salaried and makes greater than the currently threshold of $455 per week, but less than the 

proposed $970 per week, the small business owner must now spend a considerable amount of 

time calculating out varying scenarios- none of which is beneficial for anyone involved. 

Proposed rule will harm relationships between small business owners and affected employees 

As an example, suppose the employee in question is Geno, a manager at the small business who 

works an average of 50 hours per week at a weekly salary of$865 ($45,000 annually). As the 

administration would make it seem, Geno's new pay would increase to $951.50 per week 

($49,478 annually). However, this is not a realistic projection of what would happen in a small 

business where margins are tight. What is more likely to happen is that the business owner, Jane, 

will determine that she can only afford to continue paying Geno's position $45,000 per year in 

order for the business to be sustainable. Therefore Jane has three options under the proposed rule 

when promulgated. 

Option one is for Jane to make sure that Geno works no more than 40 hours under his current 

hourly rate of $865, and take on the ten hours of lost productivity herself. Option two is to reduce 

Geno's hourly rate of pay by enough so that, even with ten hours oftime-and-a-halfovertime 

pay, he still only earns $45,000 in a year. Option three is to bring in a new employee to fill the 

lost productivity, but to do so in a way so that Jane is only paying $45,000 per year total to Geno 

and the new employee. One thing is constant under these options- Jane will now have to 

carefully track Geno's hours worked. So automatically her compliance costs are increasing. 

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NFIB Comments on RIN 1235-AA II September 3, 2015 

Under option one, whereby Geno would be best off, Jane determines that she is already spending 

all of her available time operating the business, generating sales, monitoring inventory, and other 

necessary duties, Plus, now she has to track Geno's hours, Jane simply doesn't have time to take 

on the ten hours lost. In addition, Jane decides that Geno is now essentially an hourly employee 

and is no longer suited to be given the title of manager, Geno loses access to the benefits that 

come along with being a manager- such as healthcare coverage and paid time off, to less 

obvious ones like being able to leave work early on days when he has to pick up his children 

from schooL Geno is also offended that he now has to use a time clock like hourly employees 

and feels as though has been demoted, 

Under option two, Jane determines that in order keep Geno working 50 hours and earning 

$45,000 with time-and-a-half overtime pay, she has to again make Geno an hourly employee but 

at an hourly rate of$15.73. In addition to losing his benefits as above, now Geno must work 

exactly 50 hours each week in order to earn $865. Before, if he only worked 40 hours because of 

an emergency at home, he was still ensured his full weekly salary. Again, Geno feels slighted by 

the change. 

Under the third option there are several different variations Jane could choose that are all worse 

than the arrangement she and Geno have under the current rule. In this case, Jane hires an 

additional employee, Ryan, to split the 50 hours with Geno. This split could be 40 hours for 

Geno and ten for Ryan; it could be even at 25 hour each; or any combination in between. 

Regardless of what Jane decides, the hourly rate for the position will be $17.30. If she lets Geno 

work 40 hours, his pay is now $692 per week ($35,984 annually). Geno again not only feels 

slighted, but he now has to figure out where he can get a side job to make up the $9,016 

difference from his pay under the current rule versus what he will get under the proposed rule. 

It's possible that he will have to work more than 10 additional hours at a new job to make up the 

difference. Geno now works two jobs at more than 50 hours plus additional time spent 

commuting just to earn what he makes today. Meanwhile, Ryan is not looking to stay in a tenhours-per-week job for the long term. After a few months, he finds a better job and resigns. Jane 

now has to spend time and money looking for a new employee and training him or her to replace 

Ryan. 

As these examples illustrate, DOL's assumption that $561.5 million will automatically be 

transferred to workers is deeply flawed because small businesses will aim to control their costs 

by limiting overtime. The result is greater compliance costs for small businesses by having to 

track hours and employees being no better off, and in many instances, worse off. 

Proposed salary threshold is too high and does not take into account geographic difforences 

As mentioned previously, the proposed rule is a departure from the current rule because the 

proposed salary threshold is set at such a high level as to create severe consequences for areas of 

the country with lower costs of living. The current salary threshold may appear low at $455 per 

week, but it was purposely set low to recognize that in rural areas wages are lower than urban 

areas. By contrast, DOL's proposed salary threshold is higher than minimums set under any state 

laws, nearly $10,000 higher than that of California and nearly $15,000 higher than New York, 

two of the states with the highest cost of living. 

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NFIB Comments on RIN 1235-AAII September 3, 2015 

The proposed rule will particularly hurt small businesses in rural areas. These businesses pay 

employees at wage rates they can afford. Gross revenues in rural areas are far less than those in 

urban areas. There is simply not extra money available to pay employees overtime under the 

conditions set forth in the proposed rule. 

Lower salaries also go further in rural areas. As an example, a manager in Washington, D.C. 

currently making $55,000 annually has the same purchasing power as a manager in Enid, Okla. 

earning $37,121, according to the Council for Community and Economic Research's cost of 

living calculator3

• Small businesses in Enid should not be forced to pay rates currently paid in 

cities like Washington when the cost of living does not justify such an increase. 

NFIB encourages DOL to maintain the current methodology for determining the salary threshold 

to be fair to small businesses and employees in lower cost-of-living areas. By promulgating the 

proposed rule, DOL would be triggering the scenarios mentioned in the section above, and 

disproportionately hurting small businesses in rural areas. 

Concerns with automatically updating the threshold 

The proposed rule would- for the first time- establish a mechanism to automatically increase 

the salary threshold at specified intervals. Indexing the minimum salary threshold would likely 

result in instability in labor and administrative costs for small businesses in perpetuity. Though 

no schedule was specifically proposed, at set intervals- presumably annually- DOL would 

issue a new salary threshold via the Federal Register, and small businesses would have only 60 

days to implement the changes. That means every year small businesses would be forced to 

reconsider the classifications given to their employees and reassess potential raises, bonuses, or 

promotions for those employees. 

Small businesses will need to constantly review the impact the automatic increases have on 

salary compression, merit increases and budgets. This reconsideration of positions costs time and 

money and if it occurred during a downturn in the economy the increased costs would exacerbate 

the problems for small businesses at inopportune times. 

Accordingly, NFIB believes that DOL should abandon its proposal to automatically increase the 

salary threshold. 

Current duties test should remain in place 

Though DOL has not proposed changes to the duties test, it has sought feedback on the current 

test. While this current test is not perfect, small businesses have had more than a decade of 

working with it and generally understand its application. Therefore, NFIB would not support any 

change of the duties test because it would require small businesses to familiarize themselves with 

a new set of standards and would still likely have flaws. Changes would only serve to increase 

compliance costs. · 

Specifically, NFIB strongly opposes any change to the duties test that would set a specific 

percentage-of-time component- akin to California's 50 percent primary duty rule- for certain 

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NFIB Comments on RIN 1235-AAII September 3, 2015 

tasks in order to claim the duties exemptions. Any such requirement, at any percentage, would 

be an administrative nightmare for small businesses and their employees. Under such a scheme, a 

manager would have to carefully track each moment of his or her day and determine whether the 

task they performed was an exempt duty or a non-exempt duty. Such changes could require 

salaried employees to spend a specific percentage of their time performing or not performing 

certain duties. This means a manager who is responsible for store operations, and thus by virtue 

ofthe position is "managing," would often be prohibited from performing tasks such as attending 

to customers' needs, training employees in nonexempt tasks, and managing inventory. The 

manager would also be required to track his or her activities, undermining the discretion and 

flexibility that comes with being exempt. 

As previously mentioned, California already applies this "quantification requirement." To be 

exempt under California state law, an employee must spend more than 50 percent of his or her 

time performing primary duties. As a result, exemptions from overtime are very difficult to 

implement, resulting in many managers being denied the opportunities and flexibility that come 

with exempt status. 

Lastly, because there were no proposed changes to the test, NFIB strongly believes that if DOL 

intends to include changes in the final rule, it must issue a noticed of proposed rulemaking 

regarding that change. It is our opinion that failing to do so would violate the requirements of the 

Administrative Procedure Act and the Regulatory Flexibility Act (RF A). The public should be 

given proper notice and opportunity for comment on such a change, and DOL should also 

perform an IRF A since it has already recognized that a change to the overtime rules will have a 

significant economic impact on a substantial number of small entities. 

One NFIB member's story 

NFIB believes it would be illustrative to include the story of a member to demonstrate the real 

and negative effects likely to occur if DOL promulgates a final rule similar to what has been 

proposed. 

Robert Mayfield owns five Dairy Queens in and around Austin, Texas and is very concerned 

about the impact that the proposal would have on his businesses and the individuals whom he 

employs. In his words, the rule would be "bad news" for both employers and employees. 

Currently, Mayfield employs exempt managers at all five locations. These individuals earn on 

average about $30,000 per year and work between 40-50 hours per week. The managers also 

receive bonuses, more flexible work arrangements, including paid vacation and sick time, 

training opportunities, and promotions that Mayfield's hourly employees do not. Mayfield 

explained that in his company, promotion to an exempt management position carries a great deal 

of status with employees who upon promotion to a manager position boast about no longer 

having to punch time clocks. In Mayfield's opinion, it would be demeaning to force 'managers' 

to punch a clock. He also noted that his managers have more flexibility for things like doctors' 

appointments and kids' activities. Since they aren't punching in and out on a time clock they are 

paid a weekly salary even if they're out for personal activities. 

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NF!B Comments on RIN 1235-AAI1 September 3, 2015 

Under DOL's proposal, Mayfield predicted that he'll need to move the managers back to hourly 

positions as there is simply no way he can afford to pay over l 0 managers $50,000 each. As a 

result, he predicted the skill level of his managers will decrease. Moreover, Mayfield noted that 

rather than giving managers overtime, he would likely hire a few more part-time employees. 

What he would not do would be to pay managers overtime; instead he would continue strictly 

enforce a no overtime policy. Overtime costs, he said, could not be passed on to customers nor 

could the business afford to absorb added labor costs. 

Overall, Mayfield said the effect would be lower-skilled managers and higher turnover, which 

would impact the quality of service offered at his restaurants. 

"I feel most sorry for the many enthusiastic people who work for me who have worked hard to 

advance into their dream of a salaried management position," Mayfield said. "They will have 

their feelings hurt and be insulted to find out that their own government considers them to not be 

worthy of a salaried position that is eligible for a bonus based on profits that they would have 

helped to plan. It is a real source of pride and prestige to be on salary and not have to punch a 

time clock. 

"How can you be a manager and punch a time clock? The idea is to do a job, not keep track of 

your hours. A manager's income is based on results and profits, not hours worked. This is the 

antithesis of building a management mentality or in training someone to be a manager. It would 

also disrupt the workplace and lead to fewer management opportunities. It would hurt, not help, 

the people they claim to want to help." 

Proposed rule is an example of the need for small business regulatory reform 

NFIB believes that these proposed rules demonstrate the need to reform the RF A and its 

amending laws. Currently, agencies are required to perform an initial regulatory flexibility 

analysis prior to proposing a rule that will have a significant economic impact on a substantial 

number of small entities- as DOL has confirmed this proposed rule will. While these analyses 

are helpful for agencies to realize the cost and impact a proposed rule will have on small 

business, agencies would get additional benefit from convening a Small Business Advocacy 

Review panel for rules of significant impact. 

These panels allow an agency to walk through a potential proposal with small business owners, 

either in person or via telephone, and receive feedback and other input from those who will be 

directly impacted by the regulation. These panels are currently required for the Environmental 

Protection Agency, the Occupational Safety and Health Administration, and the Consumer 

Financial Protection Bureau. NFIB believes all agencies- in particular the entire Department of 

Labor- would achieve better regulatory outcomes if required to go through such a procedure. 

In this case, DOL would have benefitted from presenting the proposed salary threshold to small 

businesses so that those businesses could have provided DOL feedback on how the drastic 

increase will impact small businesses and their employees. In addition, DOL also would have 

been more likely to realize the harm they are doing by not proposing changes to the duties test if, 

as it appears, the agency has designs on ultimately tweaking the test. Small businesses could 

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NFIB Comments on RIN 1235-AA II September 3, 2015 

have offered to DOL that the lack of specifics makes it difficult to comment. It is also likely that 

DOL would have realized that if they do in fact make changes to the duties test in the final rule, 

they should first issue a notice of proposed rulemaking so that the public has a sufficient 

opportunity to respond. 

Conclusion 

NFTB strongly believes that DOL should withdraw the proposed rule because it will not achieve 

the goals that DOL strives for. Instead oftopping up wages for certain employees, the proposed 

rule will force small business owners to take more control of employee hours in order to keep 

costs in check. This control will come at a cost for small business owners, meaning that the result 

ofthe rule- if promulgated- would be that small businesses face higher costs and employees do 

not earn more money. In addition, employees are likely to see reduced benefits and opportunities 

for career growth stifled. 

In addition, though no changes to the duties test were proposed, NFIB urges DOL to publish a 

notice of proposed rulemaking if it intends to make changes in the final rule. The public should 

have the ability to weigh in on such a major change. 

We appreciate the opportunity to comment on the proposed rule. Should DOL require additional 

information, please contact the NFIB' s manager of regulatory policy, Dan Bosch, at 202-314-

2052. 

1 Federal Register, Vol SO No. 128. July 6, 2015. Page 38606. 

Sincerely, 

Amanda Austin 

Vice President, Public Policy 

NFIB 

2 htt,p://www nam org/Data-and-Reports/Cost-of-Federa\-Regulations/Federai-Regulation-Executive-Summary.odf 3 https://www colj org/ 

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Exhibit D 
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VIAE-MAIL 

The Honorable Thomas E. Perez 

Secretary, Department of Labor 

Frances Perkins Building 

200 Constitution A venue, NW 

Washington, DC 20210 

Septcmber4, 2015 

The Honorable Dr. David Wei! 

Administrator, Wage and Hour Division 

Department of Labor 

Frances Perkins Building 

200 Constitution Avenue, NW 

Washington, DC 20210 

Re: Defining and Delimiting the Exemptions (or Executive, Administrative, Professional, 

Outside Sales and Computer Employees; Proposed Rule 

Dear Secretary Perez and Administrator Wei!: 

The Office of Advocacy of the U.S. Small Business Administration respectfully submits these 

comments to the Department of Labor (DOL) for this proposed rule, which amends the 

regulations under the Fair Labor Standards Act (FLSA) governing the "white collar" exemption 

from overtime pay for executive, administrative and professional employees. 1 The proposed rule 

implements a 2014 Presidential Memorandum that directed DOL to update and modernize these 

overtime regulations. 2 Advocacy held a number of small business listening sessions and 

roundtables across the country, and this letter will outline small business comments, concerns 

and recommendations regarding this proposal. 

The Office of Advocacy 

Congress established Advocacy under Pub. L. 94-305 to represent the views of small entities 

before Federal agencies and Congress. Advocacy is an independent office within the U.S. 

Small Business Administration (SBA); as such the views expressed by Advocacy do not 

necessarily reflect the views of the SBA or the Administration. The Regulatory Flexibility 

Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act 

l Defining and Delimiting the f<:Xcmptions for Executive, Administrative, Professional, Outside Sales and Computer 

Employees; Proposed Rule, Department of Labor, Wage and f-lour Division, 80 Fed. Reg. 38516 (July 6, 2015). 2 Presidential Memorandum, Cpdating and Moderni::ing Overtime Regulations (March 13, 20 14). 
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(SBREFA), gives small entities a voice in the Federal rulemaking process. 3 For all rules that 

are expected to have a significant economic impact on a substantial number of small entities, 

Federal agencies are required by the RFA to assess the impact of the proposed rule on small 

business and to consider less burdensome alternatives. 

The Small Business Jobs Act of2010 requires agencies to give every appropriate 

consideration to comments provided by Advocacy. The agency must include, in any 

explanation or discussion accompanying the final rule's publication in the Federal Register, 

the agency's response to these written comments submitted by Advocacy on the proposed 

rule, unless the agency certifies that the public interest is not served by doing so. 

Background 

The Fair Labor Standards Act (FLSA) guarantees a minimum wage and overtime pay oftime 

and a half for work over 40 hours a week. While these protections extend to most workers, the 

FLSA does provide a number of exemptions. In March 2014, President Obama released a 

Memorandum directing DOL to modernize and streamline the existing overtime regulations, 

particularly the exemption from minimum wage and overtime pay for executive, administrative, 

professional, outside sales and computer employees.4 This is often referred to as the "EAP" or 

"white collar exemption." To be considered exempt, employees must meet certain minimum 

tests related to their primary job duties and be paid on a salary basis at not less than a specified 

minimum amount or threshold. The salary threshold for this exemption was last changed in 

2004.5 

In this proposed rule, DOL would change the salary threshold for employees who are eligible to 

receive overtime pay from $23,660 to $50,440, making 4.7 million workers newly eligible for 

overtime pay.6 DOL estimates that 211,000 small establishments and an estimated 1.8 million of 

their workers will be affected by this rule.7 DOL is also proposing to include in the regulations a 

mechanism to automatically update the salary thresholds on an annual basis using either a fixed 

percentile of wages or the Consumer Price Index for Urban Consumers (CPI-U). DOL does not 

propose regulatory changes to the "duties" tests, which require employees to perform certain 

primary duties to qualify for an overtime exemption. However, DOL is seeking feedback on 

whether these duties tests should be revised. 8 

Advocacy thanks DOL for attending our small business listening sessions and roundtables to 

obtain feedback from small entities during all stages ofthis important rulemaking process. 

After the release of the Presidential Memorandum in 2014, Advocacy held two small business 

listening sessions with DOL to gain initial feedback on this broad directive. Since the 

publication of the proposed rule, Advocacy held small business roundtables attended by DOL 

staff in the District of Columbia, Kentucky and Louisiana. Advocacy has also heard feedback 

from small entities across the country from our outreach, our Regional Advocates and from small 

3 Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164 (codified at 5 U.S.C. §601). 4 Presidential Memorandum, Updating and Modernizing Overtime Regulations (March 13, 20 14). 5 Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer 

Employees; 69 Fed. Reg. 22122 (April23, 2004). 6 Initial Regulatory Flexibility Analysis, 80 Fed. Reg. at 38605. 7 !d. at 38604. 

8 Jd. 

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business representatives. Small businesses have told Advocacy that this increase of the salary 

threshold and the numbers of workers eligible for overtime pay will add significant compliance 

costs and paperwork burdens on small entities, particularly to businesses in low wage regions 

and in industries that operate with low profit margins. Small businesses have commented that 

the high costs of this rule may also lead to unintended negative consequences for their employees 

that are counter to the goals of this rule. Based on feedback from these roundtables, Advocacy 

submitted a public comment letter seeking a 90-day extension of the comment period on August 

20, 2015.9 

DOL's IRFAUndercounts the Number of Small Businesses, Underestimates the Costs 

of the Salary Threshold, and Does Not Examine Less Burdensome Alternatives 

Under the RFA, an IRFA must contain: (I) a description of the reasons why the regulatory 

action is being taken; (2) the objectives and legal basis for the proposed regulation; (3) a 

description and estimated number of regulated small entities (based on the North American 

Industry Classification System (NAICS)); (4) a description and estimate of compliance 

requirements, including any differential for different categories of small entities; (5) 

identification of duplication, overlap, and conflict with other rules and regulations; and (6) a 

description of significant alternatives to the rule. 10 

Advocacy believes that DOL's Initial Regulatory Flexibility Analysis does not properly 

inform the public about the impact of this rule on small entities. Advocacy questions DOL's 

analysis because it relies on multiple unsupported assumptions regarding the numbers of 

affected small businesses and workers and by extension the regulatory impact of this 

proposal. DOL's IRFA analyzes small entities very broadly, not fully considering how the 

economic impact affects various categories of small entities differently. Specifically, DOL's 

analysis does not appreciate the difference between many small entities in industry subsectors, regions, and revenue sizes. DOL's IRFA does not analyze the impact ofthis rule on 

small entities as required by the RF A that are non-profit organizations and governmental 

entities serving a population ofless than 50,000. 

Small businesses have told Advocacy that DOL's estimates for human and financial 

resources costs that result from this rule are extremely underestimated. Due to the problems 

with the IRF A, DOL cannot fully consider significant and less burdensome regulatory 

alternatives to the proposed rule that would meet the agency's objectives. Advocacy 

recommends that DOL publish a Supplemental IRFA providing additional analysis on the 

economic impact of this rule on small entities and consider recommended small business 

alternatives. 

9 Comment letter from the Office of Advocacy to the U.S. Department of Labor (August 21, 2015), available at: 

https:/ /www .sba.gov/advocacy /82115 -defining-and-delimiting-exemptions-executive-administrative-professional· 

outside. 

10 5 U.S.C. § 603. 

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A. DOL's IRF A Does Not Adequately Analyze the Numbers of Small Businesses 

Affected by Rule 

(I) Key assumptions unnecessarily obscure the numbers of affected small businesses in 

industry sub sectors and revenue size categories. 

DOL's IRFA applies multiple assumptions to the Census' Survey of U.S. Businesses (SUSS) 

data to determine the number of affected businesses and workers and by extension the 

regulatory impact of the proposal. Advocacy is concerned that DOL made assumptions to 

create hypothetical data points that were otherwise easily available in the SUSS data. For 

example, DOL chooses to analyze all industries by general 2- or 3- digit North American 

Industry Classification System (NAICS) industry codes when more specific data are readily 

available. This can be important because substantially different types of companies can be 

classified under the same general NAICS code (e.g., plumbing companies and civil 

engineering companies are both under the same 2-digit NAICS code). 

Consequently, DOL may be obscuring the impact ofthis rule on an industry-subsector basis 

by only looking at small businesses in the aggregate in terms of very general industry 

definitions. This broad view of small business makes it difficult to determine which 

subsectors may face a more significant regulatory burden. Furthermore, in its economic 

analysis DOL asserts data points around the number of establishments belonging to an 

industry as well as the number of employees on a per-establishment-basis when it could find 

direct estimates of that information by firm-size and industry-subsector in the SUSS data. 

Advocacy recommends that DOL utilize these data points over general assertions to improve 

the transparency and accuracy of its economic analysis. 

(2) DOL's IRFA Should Analyze Small Business Data to Reflect Regional Differences in the 

Regulatory Impact of the Proposal 

DOL's proposal states that the current salary threshold is outdated, and proposes to base it on a 

national salary threshold of the 40th percentile of earnings for full-time salaried workers 

(estimated to be $50,440 or $970/week). According to DOL, this threshold should be 

representative of the wage for generally exempt employees. Small businesses at Advocacy's 

roundtables expressed concern that this salary threshold was too high to be representative of 

employees because DOL did not fully appreciate regional differences in wages. More 

specifically, DOL seemed to not fully consider the difference in purchasing power of its 

proposed threshold in higher- and lower-wage states and regions. In contrast, DOL's 2004 final 

rule adjusted this salary slightly lower than indicated by the national data because of the impact 

on lower wage industries such as the retail industry and in lower wages regions in the South. 11 

For example, a study by the National Retail Federation and Oxford Economics utilized data from 

the Current Population Survey (CPS) to explore differences between states in the 40th percentile 

of salary full-time wages. 12 The study found wide differences in what constitutes the 40th 

11 Defining and limiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer 

Employees; Final Rule, 69 Fed. Reg. 22122, 22168 (April23, 2004). 12 Oxford Economics for the National Retail Federation, Stale Differences in Overtime Thresholds, Addendum to 

Rethinking Overtime Exemption Thresholds Will Affect the Retail and Restaurant Industries (August 31, 20 15), 

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percentile in the three states that Advocacy held roundtables: Kentucky ($882/week), Louisiana 

($784/week), and the District of Columbia ($\ ,070/week). 

DOL could have also analyzed this state data by other factors, such as the impact on industry 

sub-sectors. The National Association of Home Builders (NAHB) completed a state-by-state 

breakdown of the impact of this rule to first-line supervisors in the construction industry (as 

defined by multiple NAICS codes), and the analysis showed a large variation in the percentage 

of workers who would be overtime eligible making under $50,440 depending on the state and the 

subsector. 13 It is clear from these examples that this proposal will have vastly different impacts in 

terms ofthe number of small entities affected and the extent oftheir regulatory burden. DOL 

should analyze these regional and industry subsector differences as well as consider them when 

constructing regulatory alternatives. 

B. DOL's IRFA Does Not Consider Key Small Entities Affected by the Rule 

Advocacy is concerned that DOL did not analyze the numbers of small entities and the economic 

impact of this rule on small entities required under the RFA including non-profit organizations 

and small governmental jurisdictions serving a population of less than 50,000. 14 Representatives 

from these key small entity groups who attended Advocacy's roundtables sought compliance 

materials to help them understand whether they were covered by this regulation. These entities 

expressed concern that their operations would have a difficult time complying with these 

regulations because they do not have the discretionary resources to pay for these extra costs. 

At Advocacy's New Orleans roundtable, a small non-profit organization operating Head Start 

programs in southeast Louisiana stated that this proposal would result in $74,000 in first year 

costs. Since 80 percent of its operating budget is from federal programs, which cannot be used 

to pay for management costs like labor, it may have to cut critical community services to reduce 

labor costs. Community services may also become prohibitively costly for small local 

jurisdictions with limited budgets. 

C. DOL's IRFA Underestimates Small Business Compliance Costs Due to Changes to the 

Salary Threshold 

Small businesses have told Advocacy that the Department has greatly underestimated the 

human resource- and financial management costs that will result from this proposal. DOL 

estimates that on average, an affected small "establishment" is expected to incur $100 to 

available at: https://nrf.com/sites/default/files/Documents/retail%201ibrarv/OE%20Addendum%202%20-

%20State%20ievel%20overtime%20threshold%20analysis.pdf. 

13 National Association of Home Builders, State by State Breakdown of First Line Supervisors of Construction 

Trades Workers Impacted by Changing Overtime Threshold From $23,660 to $50.440 (August 2015), available at: 

http://www.nahb.org/-/media/Sites/NAHB/Research/Priorities/Overtime-Wages-State-by-StateAnalysis.ashx?la=en. 

145 U.S.C. § 601(4) and (5). The RFA defines a "small organization" as any not-for-profit enterprise that is 

independently owned and operated and not dominant in its field (for example, private hospitals and educational 

institutions). The RFA defines a "small governmental jurisdiction" as governments of cities, counties, towns, 

townships, villages, school districts, or special districts, or special districts, with a population of less than fifty 

thousand. 

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$600 in direct management costs; a one hour burden for regulatory familiarization (reading 

and implementing the rule), a one hour burden per each affected worker in adjustment costs 

and a five minute burden per week scheduling and monitoring each affected worker. 15 

Advocacy is concerned that these asserted estimates of management costs may not reflect the 

actual experiences of small entities. Small businesses have told Advocacy that it will take 

them many hours and several weeks to understand and implement this rule for their small 

businesses. Many small businesses spend a disproportionately higher amount of time and 

money on compliance because they have limited to no human resources personnel, legal 

counsel or financial advisory or management personnel on staff. Many small businesses may 

adjust to these increases in time by hiring outside advisors to help them comply with these 

types of regulations which can cost thousands of dollars. DOL should take this 

disproportionate regulatory burden into account when considering the cost of this proposal on 

small entities. 

DOL estimates that the average establishment will have $320 to $2,700 in additional payroll 

costs to employees in the first year of the proposed rule, which is an increase of$6.16 per 

week per affected worker. 16 Small businesses are concerned that DOL's estimate is neither 

transparent nor accurate. Small businesses have told Advocacy that their payroll costs will 

be in the thousands of dollars. 

Small businesses have stated that one of their options is to convert salaried employees 

making under $50,440 to hourly employees. However, small businesses have stated that 

under this scenario, employers would either decrease hourly rates by an equal amount or 

reduce hours to avoid overtime pay. Employers could spend many hours a week scheduling 

and keeping track of employee work to avoid these extra costs. Employers in this scenario 

would also be understaffed, and may be required to hire and train new workers, creating extra 

costs. Under another scenario, small businesses could increase their workers' pay to over the 

$50,440 threshold to allow them to remain as salaried employees. These employers could 

then try to raise prices or reduce costs; some small businesses have stated that they may cut 

ba,ck on management staff or reduce benefits and bonuses. DOL should consider the costs 

and benefits associated with these changes in behavior when evaluating the impact of this 

rule on small entities. 

Small businesses at Advocacy's roundtables stated that this rule will have a disproportionate 

impact on certain occupations with low profit margins and wages. For example, multiple 

small grocery stores who attended our Kentucky roundtable stated their profit margins were 

under one percent and they could not pass on these extra costs to their customers. An owner 

of a small restaurant in Louisville calculated that this overtime rule will cost his business 

$50,000, or 8 percent of the business' payroll. DOL should consider the differential impacts 

of this rule on lower wage industries and geographic areas. 

D. DOL Does Not Account for Non-Financial Costs to Small Entities 

Small employers have told Advocacy that their employees may lose flexibility in their work 

schedules if they are transferred to an hourly position, and that they may lose their employees 

15 79 Fed. Reg. at 38605. 16 79 Fed. Reg. at 38605. 

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like millennials who expect a flexible work schedule. Employers have also stated that 

salaried workers often work flexible schedules by utilizing cell phones and logging onto 

work at computers from home; these employers could be more likely to stop allowing 

workers to have this type of work arrangement. Similarly, employers stated that they would 

try to limit travel for work and development reasons. Many roundtable participants stated 

that salaried employees not tied to a clock have flexibility in their work schedules, and 

therefore they can take off a few hours for a child's soccer game or medical appointment. 

After this rule is adopted, these now hourly workers would have to log in and out and would 

not be paid for hours "off the clock." 

Small businesses at Advocacy's roundtables were also concerned that this rule may lead to 

lower worker morale and by extension productivity, because many employees may believe 

that transferring from a salaried position to an hourly position is a demotion in their career 

advancement. Small businesses have commented that they may not be able to hire as many 

entry-level management positions, and their senior managers would absorb many of these job 

responsibilities. 

Advocacy is also concerned that DOL does not consider the costs and disruption of this 

proposal on non-traditional businesses that operate with non-traditional work schedules. For 

example, a small home builder stated that they complete I 0 custom homes a year and must 

from time to time work long hours due to weather constraints; this rule would result in extra 

costs and delays in building a home. Advocacy has heard from small businesses such as 

banks and medical facilities that may have to cut back on their hours of service. A 

representative from the Outdoors Industry Association stated that this rule is particularly 

costly for seasonal businesses as they do not have consistent work hours for employees over 

the work year. 

Small businesses at Advocacy's roundtable asked DOL representatives about the application 

of compensation time, part-time arrangements (for example for professors and college staff) 

and flexible work arrangements under this regulation. Small businesses are also concerned 

that the proposed rule does not count worker bonuses or commissions as part of the salary 

computation. Advocacy heard from many companies such as automobile dealerships, staffing 

agencies and golf courses whose employees are paid in commission or bonuses; these entities 

have suggested that these incentives should be added to their base salary under this rule or 

they may otherwise be reduced or ended, limiting their ability. 

E. DOL Does Not Consider Less Burdensome Alternatives that Would Still 

Accomplish the Agency's Objectives 

Under the RFA, the IRF A must contain a description of any significant regulatory 

alternatives to the proposed rule which accomplish the stated objectives of the applicable 

statutes and which minimize any significant economic impact of the proposed rule on small 

entities. 17 DOL's IRFA is deficient because it does not analyze any regulatory alternatives 

that would minimize the economic impact of this rule for small businesses. 

DOL states that it does not provide any differing compliance or reporting requirements for 

17 5 U.S.C. § 603(c). 

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small businesses because "it appears to not be necessary given the small annualized cost of 

the rule, estimated to range from a minimum of $400 to a maximum of $3,300."18 Based on 

feedback from small businesses as outlined in this letter, Advocacy believes that DOL's 

numbers of small businesses affected and cost estimates are extremely low. Advocacy 

recommends that DOL reassess the impact of this rule on small businesses in a Supplemental 

Initial Regulatory Flexibility Analysis. With more accurate information about the numbers 

of small businesses affected and the economic impacts of this rule to small businesses, DOL 

can better analyze less burdensome significant regulatory alternatives that would also meet 

the agency's objectives. 

DOL states that the "FLSA creates a level playing field for businesses by setting a floor 

below which employers may not pay their employees" and therefore setting differing 

compliance standards would "undermine this important purpose of the FLSA." 19 Advocacy 

believes that small businesses are disproportionately affected by this proposal, and suggests 

that DOL consider the significant alternatives put forward by small businesses to both better 

meet its regulatory goals and reduce the burden on small entities. 

1. Small businesses recommend that DOL consider a salary threshold for the EAP 

exemption in the FLSA of the 40th percentile of earnings that is adjusted to reflect regional 

wages and wages in certain occupations such as the retail sector. This is similar to the 

methodology that DOL utilized in its 2004 rulemaking when it updated these regulations. 

Some small businesses have also recommended different salary thresholds by state, 

depending on the 40th percentile in each state. 

2. Small businesses request a longer time to implement this final rule as they believe that it is 

unrealistic for management to comply with this regulation in four months, which is the 

implementation date that DOL provided employers after the agency last updated its salary 

threshold in 2004. Small businesses must understand this rule, evaluate and reclassify their 

workforce, and plan their budget and raise funding to pay for the compliance costs of this 

regulation. Advocacy recommends that DOL provide small businesses at least a year or 18 

months to comply with this regulation. 

3. Small businesses have also recommended a gradual increase in the salary threshold, 

similar to the implementation schedules given when a minimum wage rule comes into place 

so it is not such a sudden cost increase. 

Recommendations 

1. DOL Should Publish a Supplemental IRFA to Reanalyze Small Business Impacts 

DOL's IRFA does not properly analyze the economic impact of this rule on small businesses. 

The Supplemental IRFA should provide a more accurate estimate ofthe small entities 

impacted by this proposal, and should include an analysis of industry sub-sectors, regional 

differences and revenue sizes. Additionally, this IRFA should analyze the number of small 

non-profit organizations and small governmental jurisdictions serving a population under 

50,000 that are affected by this rule, and the economic impact of this rule on these entities. 

18 79 Fed. Reg. at 38607. 19 79 Fed. Reg. at 3 8607. 

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DOL should be more transparent in its compliance cost data and utilize data provided in the 

comment process to accurately estimate the human resources and financial management costs 

of this regulation. With this important information regarding the numbers of small 

businesses affected by this regulation and the economic impact on small entities, DOL can 

effectively analyze less burdensome significant regulatory alternatives that would minimize 

the impact on small businesses that would also meet the agency objectives. 

2. DOL Is Required to Publish a Small Business Compliance Guide 

DOL is required to publish a Small Business Compliance Guide for this regulation. For each 

rule requiring a final regulatory flexibility analysis, section 212 of SBREF A requires the 

agency to publish one or more small entity compliance guides. 20 Agencies are required to 

publish the guides with publication of the final rule, post them to websites, distribute them to 

industry contacts, and report annually to Congress.21 Advocacy is available to help DOL in 

the writing and dissemination of this guide. 

3. DOL Should Publish a Separate NPRM for Any Specific Duties Test Revisions 

DOL should issue a separate NPRM and IRFA if the agency seeks to adopt any changes to 

the duties tests, as the agency has not provided adequate notice to small businesses on the 

proposed revisions or any analysis of the economic impact of these changes in the IRF A to 

allow for meaningful public comment. DOL preamble states that "it is not making specific 

proposals to modify the standard duties tests," which require certain that workers perform 

primary duties to qualify for an overtime exemption. 22 The preamble lists five general 

questions about the duties tests, mentioning California's duties test (50 percent primary duty 

requirement) and the concurrent duties regulations (which allow the performance of both 

exempt and nonexempt duties concurrently). In its preamble, DOL suggests that adopting this 

proposed rule would make future revision unnecessary. When Advocacy held a Small 

Business Listening Session in 2014 after the Presidential Memorandum was released, small 

businesses cited potential changes to the duties test to be the most costly and problematic 

aspect of an update to the FLSA EAP exemption. Small businesses are concerned that 

quantification of exempt managers' duties will be extremely burdensome for operations 

because every task must be tracked and classified either an exempt or non-exempt action. 

Small operations will be disproportionately impacted by a change to the duties test because 

they have less staff and managers are constantly multi-tasking throughout the day. 

4. DOL Should Analyze the Impact of Annual Salary Updates on Small Businesses 

DOL is proposing to include in the regulations a mechanism to automatically update the 

salary and compensation thresholds on an annual basis using either a fixed percentile of 

wages or the CPI-U. Advocacy recommends that DOL assess the economic impact of these 

automatic updates on small businesses. According to a forecast by NRF and Oxford 

Economics, if the overtime threshold were set at $970/week in 2016 and indexed to CPI-U 

inflation, the 401

h percentile of wages for full-time non-hourly wages would be $1,0 13/week 

20 Small Business Regulatory Enforcement Fairness Act, Pub. Law 104-121 § 212. 21 The Small Business and Work Opportunity Act of2007 added these additional requirements for agency 

compliance to SBREFA. 22 79 Fed. Reg. at 38518. 

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in 2018 and $1,08lfweek in 2021.23 Small businesses at Advocacy's roundtable were 

concerned about this unprecedented requirement, and stated that it would add compliance 

costs every year to comply with these updates. Many businesses were concerned about 

missing these updates in the Federal Register and being subject to enforcement actions. 

Conclusion 

While small businesses support a modest increase in the salary threshold under the "white 

collar" FLSA exemption, DOL's proposal more than doubles this salary threshold. Based on 

small business feedback, Advocacy believes that these changes will add significant 

compliance costs and paperwork burdens on small entities, particularly businesses in low 

wage regions and in industries that operate with low profit margins. Small businesses at our 

roundtables have told Advocacy that the high costs of this rule may also lead to unintended 

negative consequences for their employees that are counter to the goals of this rule. 

Advocacy is concerned that the Initial Regulatory Flexibility Analysis (IRFA) contained in 

the proposed rule does not properly analyze the numbers of small businesses affected by this 

regulation and underestimates their compliance costs. Advocacy recommends that DOL 

publish a Supplemental IRFA providing additional analysis on the economic impact of this 

rule on small entities and consider recommended small business alternatives. DOL must also 

publish a small entity compliance guide with the publication of the final rule, as required by 

the Regulatory Flexibility Act (RFA). 

Advocacy reiterates its thanks to DOL for participating in five Advocacy listening sessions 

and roundtables on this regulation. For additional information or assistance please contact me 

or Janis Reyes at (202) 619-0312 or Janis.Reyes@sba.gov. 

Copy to: 

Sincerely, 

t'k~:?4~ Claudia Rodgers 

Acting Chief Counsel for Advocacy 

Janis C. Reyes 

Assistant Chief Counsel 

The Honorable Howard Shelanski, Administrator, Office of Information and 

Regulatory Affairs, Office of Management and Budget 

23 Oxford Economics for the National Retail Federation, Updated Impacts of Raising the Overtime Exemption 

Threshold, Addendum to Rethinking Overtime Exemption Thresholds Will Affect the Retail and Restaurant 

Industries, Page 5 (July 17, 2015), available at: 

https://nrf.com/sites/default/files/Documents/retail%201ibrarv!Rethinking-Overtime-threshold-update MEMO.pdf. 

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216 

Chairman VITTER. Thank you very much. 

And now, Ms. Gupta. 

STATEMENT OF SARITA GUPTA, EXECUTIVE DIRECTOR, JOBS 

WITH JUSTICE 

Ms. GUPTA. Chairman Vitter and members of the Committee, 

thank you for the opportunity to testify today about the Administration’s proposed update to the overtime rules under the Fair 

Labor Standards Act. 

My name is Sarita Gupta. I am the executive director of Jobs 

With Justice. Jobs With Justice is an independent nonprofit organization dedicated to advancing working people’s rights and an economy that benefits all Americans. We bring together labor, community, faith, and student voices at the national and local levels 

through a network of coalitions across the country. 

At Jobs With Justice, we believe the Fair Labor Standards Act’s 

protections are central to ensuring that all Americans can enjoy the 

country’s prosperity to which they contribute. 

The United States Congress and President Franklin Delano Roosevelt recognized in 1938 what today’s working women and men 

know to still be true: that economic stability can only be achieved 

through family-supporting wages and hours. If today’s employees 

are to realize the law’s basic promise of a reprieve from overwork 

in order to spend time with their families, the FLSA’s overtime 

protections must be strengthened and protected. We believe the 

U.S. Department of Labor’s proposal to adjust the salary test for 

determining overtime eligibility will do just that. Raising the salary threshold from $23,660 in annual pay to $50,440 in 2016 will broadly benefit millions of working people, 

whether they are newly eligible for overtime protections or are 

more squarely protected against overtime misclassification that can 

occur under the more ambiguous duties test. 

The current threshold covers only 8 percent of salaried employees 

today. Employers are even currently within their rights to deny 

overtime pay to employees who earn less than the poverty level for 

a family of four. Real lives will change for the better by updating 

the overtime rules—real people like Wanda Womack, who earned 

under $40,000 managing a Dollar General Store in Alabama. 

Wanda put in 50 to 70 hours a week, most of it spent doing nonexempt work like running the cash register and unloading merchandise from trucks. 

Part-time hourly employees also stand to benefit from a higher 

salary threshold. Too many people who stock the shelves, sweep 

the floors, and service food are working fewer hours than they 

would like. 

In our recent study of employers’ scheduling practices in Washington, D.C.’s service sector, 80 percent of survey respondents told 

us it was very important or somewhat important that they receive 

more hours. Many of these individuals will likely have an opportunity to gain additional hours as employers shift assignments 

from overworked, low-paid salary employees who were previously 

exempted from overtime protections. 

As a nonprofit employer, I also have had to assess the proposed 

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217 

date will require some of our local coalitions to examine and amend 

their employment practices. We believe this is a positive development. A higher salary threshold will require Jobs With Justice and 

nonprofits like us to promote practices that allow people to spend 

more time with their families, likely increasing employee satisfaction and lowering burnout rates along the way. This is good for our 

employees, for our organizations, and for the people we strive to 

serve. 

I know some nonprofit organizations have expressed concerns 

about the proposed overtime rule update and the impact it could 

have on their budgets. I also know that much of the ‘‘concern’’ for 

nonprofits’ ability to comply with updated overtime rules has been 

raised by Big Business lobby groups that do not typically advocate 

for the interests of nonprofits or the people served by them. 

These concerns are vastly overstated, and, frankly, they dismiss 

the rights of working people. Employees of nonprofits deserve a fair 

return on their work. 

I know firsthand that for nonprofit employees the work, while 

often rewarding, can be stressful, emotionally tolling, and lower 

paying. These conditions only further substantiate the need for 

nonprofit employees to have time away from work to recharge and 

reconnect with family and friends, just as was intended by FLSA. 

Nonprofits that contract with State Medicaid departments can 

push the state to increase rates. Many states revisit their Medicaid 

budgets throughout the year, since Medicaid costs fluctuate based 

on the economy, enrollment, eligibility, and other factors. The 

State’s investment will be less than many people may assume. The 

Federal match for Medicaid spending can range from 50 percent to 

74 percent, depending on the state. Regardless, no nonprofit should 

condone a business model that only succeeds based on its ability 

to take advantage of its employees through lax overtime rules. 

The FLSA was enacted with the belief that Americans should 

earn a fair day’s pay for a fair day’s work. Yet today the inverse 

is true for too many of America’s salaried employees who are putting in more than a fair day’s work for far less than a fair day’s 

pay. The Administration’s proposed update to the FLSA’s overtime 

rules will serve as a crucial step to restoring this basic tenet of economic fairness—a tenet that should apply to all people, no matter 

the industry they work in or the size of their employer. 

In the interest of time, I will reserve the remainder of my comments and take questions from the Committee members. Thank 

you. 

[The prepared statement of Ms. Gupta follows:] 

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JOBS JUSTICE 

Testimony of 

Sarita Gupta 

Executive Director, Jobs With Justice 

Hearing on 

"An Examination of the Administration's Overtime Rule and the Rising Costs of Doing Business" 

Before the 

U.S. Senate Committee on Small Business and Entrepreneurship 

10:00 a.m., Wednesday, May 11, 2016 

Russell Senate Office Building, Room 428A 

Chairman Vitter, Ranking Member Shaheen, and Members of the Committee: 

Thank you for the opportunity to testify on the topic oft he administration's proposed update to the 

regulations governing which people are entitled to the Fair Labor Standards Act's (FLSA) overtime pay 

protections. 

My name is Sarita Gupta, and I am the executive director of Jobs With Justice, an independent nonprofit 

organization dedicated to advancing working people's rights and an economy that benefits all 

Americans. Jobs With Justice brings together labor, community, faith and student voices at the national 

and local levels through a network of coalitions across the country. With research, analysis, organizing, 

and public advocacy, Jobs With Justice creates innovative solutions to the problems working people face 

today. 

At Jobs With Justice, we believe FLSA protections are central to ensuring that all Americans can enjoy 

the country's prosperity to which they contribute. In passing and signing the FLSA into law, the U.S. 

Congress and President Roosevelt recognized in 1938 what today's working women and men know to 

still be true: economic stability can only be achieved through family-sustaining wages and hours. 

Jobs With Justice supports the administration's proposed update of regulations implementing the FLSA's 

overtime provisions. If today's employees are to realize the law's basic promise of a reprieve from 

overwork in order to spend time with their families, the FLSA's overtime protections must be 

strengthened and protected. We believe the proposed rule will do just that. 

Raising the Salary Threshold Will Broadly Benefit Working People 

The U.S. Department of Labor (DOL) has proposed adjusting the "salary test," the more objective 

method for determining overtime eligibility, by increasing the salary threshold from $23,660 in annual 

pay to $50,440 in 2016.1 

1 Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside sales and Computer Employees, 80 FR 38515 {July 

6. 2015) 

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The working people I talk to say adjusting the salary threshold is long overdue. The current threshold 

covers only eight percent of salaried employees today. Individuals that Congress never intended to be 

exempt from overtime protections have fallen out of the law's coverage. Employers are currently within 

their rights to deny overtime pay to employees earning less than the poverty level for a family of four. 

Raising the salary threshold to $50,440 in 2016 will benefit a significant number of employees. The DOL 

itself estimates that the proposed salary threshold would extend overtime protections to nearly 5 

million employees. The Economic Policy Institute projects 13.5 million people will directly benefit from 

the proposed update to the overtime rules, most of who will newly gain overtime pay eligibility.' 

At the same time, 10 million salaried employees presently paid between the current and proposed 

salary thresholds stand to gain greater protections against overtime misclassification.3 These women 

and men are currently eligible for overtime protections based only on their job duties. The proposed 

salary threshold will establish their overtime eligibility solely by the salary test, making it difficult for 

unscrupulous employers to manipulate the duties test to misclassify them as exempt from overtime 

protections. 

Access to overtime eligibility will have a meaningful impact on the lives of Americans who qualify under 

either scenario. Quite simply, their time will become more valuable. Assigning them more than 40 hours 

of work per week will be more expensive for their employers- and, as an employer myself, I say that is a 

good thing. 

I have mentioned a number of statistics, but I urge us to consider the real lives that will change for the 

better by changing the rules. Wanda Womack managed a Dollar General store in Alabama for 11 years. 

In 2004, her last year with the company, Wanda earned about $37,000 working SO to 70 hours each 

week. Wanda was accountable for the type of responsibilities we typically expect of a store manager, 

but she spent most of her time performing non-managerial work, like running the cash register, 

unloading merchandise from trucks and performing inventory.4 

Scott Wilson worked for Walmart as an asset protection manager between December 2011 and 

February 2014, earning $46,000 by the end of his tenure with the company. Scott's job description said 

he was supposed to keep Walmart's alarm equipment in working order, catch and process shoplifters, 

monitor store surveillance footage, train store associates on the proper use of theft-prevention 

equipment and attend weekly continuing education meetings on theft-prevention techniques. Upon 

taking over a new job at his store, Walmart regularly assigned Scott basic tasks that should have been 

outside normal managerial duties, such as making repairs in various departments, unloading 

merchandise from trucks, corralling shopping carts and assembling promotional displays. These nonmanagerial, non-exempt tasks ended up taking most of Scott's day. Scott often needed to stay late to 

2 Eisenbrey, R. & Mishet L (2015, Aug. 3). The New Overtime Salary Threshold Would Directly Benefit 13.5 Mlltion Workers. Washington, DC: 

Economic Polley Institute. Retrieved from: http://www.epi.org/publil:ation/overtime-thresho!d-would-benefit-13-5-million/. 

'80 FR 38546 (July 6, 2015) 4 Conti; J. (2014, Dec.) The Case for Reforming Federal Overtir:ne Rules: Stories from America's Middle Class. New York, NY: National 

Employment Law Project. Retrieved from: http://www.nelp.org/content;uploads/2015/03/Reforming-Federai-Overtime-Stories.pdf. 

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get the work in his job description done. That meant Scott was working 60- to 70-hour weeks, which 

negatively impacted Scott and his family.' 

"When everything over 40 hours is free to the employer, the temptation to demand more is almost 

irresistible," consultant Fran Sussner Rodgers observed in a June 2015 New York Times column.' 

Currently, exempt employees like Wanda and Scott, working jobs with little pay and long hours, know 

this to be true. Under the proposed update to the salary threshold, these women and men will either 

get a pay raise or many hours of their lives back from their employers. 

Part-time, hourly employees also stand to benefit from a higher salary threshold. We know that too 

many people who stock the shelves, sweep the floors and serve us food are working fewer hours than 

they would like. In our recent study of employers' scheduling practices in the service sector in 

Washington, D.C., 80 percent of survey respondents told us it was very important or somewhat 

important that they receive more hours.' Many of these individuals will likely have an opportunity to 

gain additional hours as employers shift assignments from overworked, low-paid salary employees who 

were previously exempted from overtime protections. 

As a Nonprofit Executive, I Know the Proposed Overtime Update Is the Right Thing to Do 

In my role as the executive director of Jobs With Justice, I also have had to assess the proposed update 

to the overtime regulations from the perspective of a nonprofit employer. At Jobs With Justice local 

coalitions across the country, we have organizers who are currently under the proposed updated salary 

threshold. The proposed overtime rule update will require our coalitions to examine and amend their 

employment practices. 

We think this is a positive development. A higher salary threshold will require us, and nonprofit groups 

like us, to promote practices that allow people to spend more time with their families, likely increasing 

employee satisfaction and lowering burnout rates along the way. That is good for our employees, for 

our organizations and fort he people we strive to serve. 

I know some nonprofit organizations have expressed concerns about the proposed overtime rule update 

and the impact it could have on their budgets. I also know that much of the "concern" for non profits' 

ability to comply with updated overtime rules have been raised by the Chamber of Commerce, the 

Society for Human Resource Management and other Big Business lobby groups that do not typically 

advocate for the interests of non profits or the people served by them. 

These concerns are vastly overstated, and they dismiss the rights of working people. Overtime pay was 

instituted to protect employees from difficult and, with the onset of fatigue, potentially dangerous 

working conditions, and to ensure that there is not an incentive for employers to hire just one person to 

5 /bid. 

6 Sussnf!r Rodgers, F. (2015, June 22). Who Owns Your Overtime? The New York Times. Retrieved from: 

http://www.nytlmes.com/2015/06/22/opinionjwho-owns-your-overtime.htm!?ref=opinion. 

7 Schwartz, A., Wasser, M., Gillard, M., & Paarlberg, M. {2015). Unpredictable, Unsustainable: The Impact of Employers' Scheduling Practices in 

D.C. Washington, DC: DC Jobs With Justice. Retrieved from: http://www.dcjwj.org/wpcontent/upfoads/2015/06/DCJWJ_Schedu!ing_Report_201S.pdf. 

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do the work of two people. People who work for nonprofit organizations deserve a fair return on their 

work. I know first-hand that for some nonprofit employees, the work, while often rewarding, can be 

stressful, emotionally tolling and lower paying. These conditions only further substantiate the need for 

nonprofit employees to have time away from work to recharge and to reconnect with family and 

friends, just as was intended by the FLSA. 

Non-profits that contract with state Medicaid departments can push the state to increase rates. Many 

states revisit their Medicaid budgets throughout the year, since Medicaid costs fluctuate based on the 

economy, enrollment, eligibility and other factors. The state's investment will be less than many people 

may assume. The federal match for Medicaid spending can range from 50 to 74 percent, depending on 

the state.8 States that wisely invest in increasing their rates will put more money in the pockets of 

working people and, as a result, into their state and local economies. 

In January 2015, rules took effect that provided nearly 2 million home-care workers with overtime 

protections for the first time.' As with these home-care rules, I believe the DOL is committed to 

providing technical support and guidance for nonprofit employers, and to working with the Centers for 

Medicare and Medicaid Services to address Medicare- and Medicaid-funded impacts. 

Regardless, no nonprofit employer should condone a business model that only succeeds based on its 

ability to take advantage of its employees through lax overtime rules. Overtime protections ensure that 

people are paid for the long hours they work, and that employers hire more employers when additional 

hours are required. It is the right thing to do. 

The FLSA was enacted with the belief that Americans should earn a fair day's pay for a fair day's work. 

Yet today the inverse is true for too many of our country's salaried employees who are putting in more 

than a fair day's work for far less than a fair day's pay. That is true for employees of big businesses, small 

businesses, and non profits. The administration's proposed update to the FLSA's overtime regulations 

will serve as a crucial step to restoring this basic tenet of economic fairness- a tenant that should apply 

to all people, no matter the industry they work in or the size of their employer. 

8 See the federal Medical Assistance Percentage (FMAP) for Medicaid and Multiplier, Timeframe: FY 2017. (2016). Kaiser Family Foundation. 

Retrieved from: http://kff.org/medicaid/state-indicator/federa!-matching-rate-and-multiplier/. 9 Application of the Fair Labor Standards Act to Domestic Service,78 FR 60453 {October 1, 2013). 

4 
222 

Chairman VITTER. Thank you very much. 

And now, Mr. Mantilla, welcome. 

STATEMENT OF OCTAVIO MANTILLA, CO-OWNER, BESH RESTAURANT GROUP, ON BEHALF OF THE NATIONAL RESTAURANT ASSOCIATION AND THE BESH RESTAURANT 

GROUP 

Mr. MANTILLA. Thank you, Chairman. Good morning, Chairman 

Vitter and distinguished members of the Committee. Thank you for 

the opportunity to testify today on the impact that the proposed 

overtime regulations would have on restaurants like mine and the 

concerns we have with some of the ideas floated by the Department 

of Labor for the final regulation. 

My name is Octavio Mantilla. I am co-owner of the Besh Restaurant Group. I am honored to share the perspective of my company. 

Today my testimony will focus on some of the issues that my 

company and the industry have been struggling with in preparing 

for potential changes to the current overtime regulations. At the 

end of the day, I need to ensure that the Besh Restaurant Group 

is fully compliant with the law, while remaining economically 

healthy and vibrant. 

The three main issues that I would like to address today include: 

adjustments to the duties test being considered, the proposed salary level, and the proposed automatic increases. 

I would also like to point out that the overall overtime regulatory 

proposal is adding to the tremendous amount of uncertainty created by the level of Federal regulations from the last 5 years. 

I was born in Nicaragua and moved to New Orleans as a child. 

At the age of 16, I got my first job in a restaurant as a dishwasher 

and later waiting tables. I continued to work my way up and eventually moved through all managerial levels. 

While working in the industry, I earned a bachelor’s degree from 

Tulane University and an MBA from the University of New Orleans. I would not have been able to achieve these milestones without the flexibility that being a manager provided me. As a manager, while making less than many waiters, I had more flexibility 

to manage my work schedule and attend classes. The flexibility of 

being on salary was a big help to me. I would not be where I am 

today without that opportunity. 

After graduating, I helped open Harrah’s Casino & Hotel in New 

Orleans and then worked in St. Louis, Missouri, as Harrah’s director of operations. I have opened numerous restaurants for Harrah’s 

nationwide. My story is repeated in our industry over and over. 

In fact, nine in ten restaurant managers started in entry-level 

positions, and eight in ten restaurant owners also began in our industry with an entry-level position. Doing away with the flexibility 

entry-level salaried managers have to, among other things, go back 

and forth from work to school would diminish professional growth 

opportunities in our industry. 

I returned to New Orleans to be reunited with my friend Chef 

John Besh. John and I became partners in the Besh Restaurant 

Group. Since becoming John’s partner, the Besh Restaurant Group 

has expanded to include several additional restaurants, one of 

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223 

them being Shaya, which was voted Best New Restaurant in America last week by the James Beard Foundation, a modern Israeli cuisine restaurant, with my partner Israeli-born Alon Shaya, who also 

was an entry-level manager. 

As to the duties test, it is clear to operators in the industry that 

any reduction in litigation that the Department seeks to obtain 

with the proposed rule’s increase in the salary threshold would be 

lost if the changes being considered to the duties test become final. 

A long duties test would mandate a percentage limitation on nonexempt work that a manager can perform. The problems with the 

long duties test structure are well known and also acknowledged 

by the Department of Labor in the 2004 Overtime Rule. In 2004, 

the Department stated that the strict percentage limitations on 

nonexempt work in the long duties test would impose significant 

monitoring requirements and recordkeeping burdens. 

In our industry, managers need to have a hands-on approach to 

ensure that operations run smoothly. Any attempt to artificially 

cap the amount of time exempt employees can spend on nonexempt 

work would place significant burdens on restaurants, increase labor 

costs, cause customer service to suffer, and result in an increase in 

wage and hour litigation. Just imagine a manager in a restaurant 

not being able to fill up a glass of water for you or having to write 

it down during a service period. It is just not possible. 

As to the minimum salary threshold, the Department believes its 

proposed salary level does not exclude from exemption an unacceptably high number of employees who meet the duties test. However, 

when applied to my industry, the contrary is true. 

Even before adjusting for regional economic differences, most 

managers and crew supervisors in our industry do not meet the 

proposed salary level of $970 per week. Some of these employees 

would qualify as exempt under the new proposed salary level only 

if the Department allowed bonuses to be used to calculate the employee’s salary level. Furthermore, the median annual salary paid 

to crew and shift supervisors in our industry is $38,000. 

It is clear that, at least in reference to the restaurant industry, 

the proposed salary level does exclude from exemption an unacceptably high number of employees. 

I think I will stop there for the purpose of time. 

[The prepared statement of Mr. Mantilla follows:] 

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NATIONAL 

RESTAURANT 

ASSOCIATION 

Statement 

On behalf of the 

National Restaurant Association 

& 

Besh Restaurant Group 

ON: AN EXAMINATION OF THE ADMINISTRATION'S OVERTIME RULE AND THE 

RISING COSTS OF DOING BUSINESS 

To: U.S. SENATE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

BY: 0CTAVIO MANTILLA, CO-OWNER, BESH RESTAURANT GROUP 

DATE: MAY 11,2016 
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Statement on: "An Examination of the Administration's Overtime Rule and the Rising 

Costs of Doing Business" 

By: Mr. Octavio Mantilla 

On Behalf of the National Restaurant Association & 

the Besh Restaurant Group 

Senate Committee on Small Business and Entrepreneurship 

428A Russell Senate Office Building 

Washington, DC 20510 

May 11, 2016 at 10:00am 

Good Morning Chairman Yitter, Ranking Member Shaheen, and distinguished members 

of the Committee. Thank you for the opportunity to testify today on the impact that the 

proposed overtime regulations would have on restaurants like mine and the concerns we have 

with some of the ideas floated by the Department of Labor ("Department") for the final 

regulation. 

My name is Octavio Mantilla and I am a Co-Owner of the Besh Restaurant Group. 

I'm honored to share the perspective of my company and the National Restaurant 

Association. 

Today, my testimony will focus on some ofthe issues that my company and the 

industry have been struggling with in preparing for potential changes to the current overtime 

regulations. At the end of the day, I need to ensure that Besh Restaurant Group is fully 

compliant with the law, while remaining economically healthy and vibrant. Some of the 

issues I would like to address today include: 

I. The adjustments to the duties test being considered; 

2. The proposed salary level; and, 

3. The proposed automatic increases. 

I would also like to point out that the overall overtime regulatory proposal is adding 

to the tremendous amount of uncertainty created by the level of federal regulations from the 

last five years. 

Besh Restaurant Group 

I was born in Nicaragua and moved to New Orleans as a child. At sixteen, I got my first 

job in a restaurant as a dishwasher and later waiting tables. I continued to work my way up and 

eventually moved through all managerial levels. 

While working in the industry, I earned a bachelor's degree from Tulane University and 

an MBA from the University of New Orleans. I would not have been able to achieve these 
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Octavia Mantilla 

An Examination of the Overtime Rule 

May I/, 2016 

milestones without the flexibility that being a manager provided me. As a manager, while 

making less than many waiters, I had more flexibility to manage my work schedule and attend 

classes. I could not take a six hour or eight hour shift and go to school, as required from fulltime hourly employees. The flexibility of being on salary was a big help to me. I would not be 

where I am today without that opportunity. 

After graduating, I helped open Harrah's Casino & Hotel in New Orleans and then 

worked in St. Louis as Harrah's Director of Food Operations. I have opened numerous fine 

dining restaurants for Harrah's nationwide. My story is repeated in our industry over and over. 

In fact, nine in ten restaurant managers started in entry-level positions and eight in ten restaurant 

owners also began in our industry with an entry-level position. Doing away with the flexibility 

entry-level salaried managers have to, among other things, go back-and-forth from work to 

school would diminish professional growth opportunities in our industry. 

I returned to New Orleans to be reunited with my old friend Chef John Besh at Besh 

Steakhouse at Harrah's. John and I became partners in the Besh Restaurant Group, combining 

his vast experience in restaurant operations with my passion for customer service. Since 

becoming John's partner, the Besh Restaurant Group has expanded to include the restaurants of 

La Provence, LUke New Orleans, Domenica, LUke San Antonio, Borgne, Pizza Domenica, 

Johnny Sanchez Baltimore, Johnny Sanchez New Orleans, Shaya and Willa Jean. 

Earlier this year, the Besh Restaurant Group acquired a space in New Orleans to house a 

new private events venue, dubbed Pigeon & Prince. Executive Chef Erick Loos of La Provence 

is helming the culinary development for the space. 

The Restaurant and Foodservice Industry 

The National Restaurant Association is the leading trade association for the restaurant 

and foodservice industry. Its mission is to help members like me establish customer loyalty, 

build rewarding careers, and achieve financial success. The industry is comprised of one million 

restaurant and foodservice outlets employing over 14 million people. Restaurants are jobcreators. 

While small businesses comprise the majority of restaurants-more than nine in ten 

restaurants have fewer than 50 employees-the industry as a whole is the nation's second-largest 

private-sector employer, employing about ten percent of the U.S. workforce. In addition, more 

than seven out of ten eating and drinking establishments are single-unit operators. However, the 

restaurant business model produces relatively low profit margins of only four to six percent 

before taxes, with labor costs being one of the most significant line items for a restaurant. The 

restaurant industry is highly labor-intensive and combined with the low profit margins it creates 

low profits per employee. 

Adjustments to the duties test are not necessary and should be avoided. 

It is clear to operators in the industry that any reduction in litigation that the Department 

seeks to obtain with the proposed rule's increase in the salary threshold would be lost if the 

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Octavio Mantilla 

An Examination of the Overtime Rule 

May 11, 2016 

changes being considered to the duties test became final. In particular, the industry is extremely 

troubled by the notion that the Department is looking at California's over-50% quantitative 

requirement, also known as a "long" duties test structure, for an exempt employee's primary 

duty. 

A long duties test would mandate a percentage limitation on non-exempt work that a 

manager can perform. The problems with the long duties test structure are well known and also 

acknowledged by the Department of Labor in the 2004 Overtime Rule. In 2004, the Department 

stated that the strict percentage limitations on nonexempt work in the long duties test would 

impose significant monitoring requirements and recordkeeping burdens. It also acknowledged 

that employers would have to conduct a detailed analysis of the substance of each particular 

employee's daily and weekly tasks in order to determine if the exemption applied. Finally, 

distinguishing which specific activities are inherently a part of an employee's exempt work has 

proven to be a subjective and difficult evaluative task that is prompting contentious disputes and 

increased litigation in California. 

If the Department of Labor now decides to enact changes to the duties test based only on 

answers to the general questions asked in the proposed regulation, rather than on the basis of 

comments on any specific proposal, the requirements of the Administrative Procedure Act 

("APA"), the Regulatory Flexibility Act, and the various Executive Orders related to regulatory 

activity would not have been followed. I should not be expected to know how labor law works 

in California. The Department should not seek input based on hypotheticals and, instead, should 

explain in an actual regulatory proposal that the regulated community can consider, evaluate, and 

comment upon. Adding new major regulatory text to a final regulation with no opportunity to 

see it beforehand directly contradicts the goal of the APA. 

Moreover, the Department optimized the duties test in 2004 to reflect the realities ofthe 

modern economy, a move that recognized the unique roles and responsibilities restaurant 

managers have. In our industry, managers need to have a "hands-on" approach to ensure that 

operations run smoothly. Any attempt to artificially cap the amount of time exempt employees 

can spend on nonexempt work would place significant administrative burdens on restaurant 

owners, increase labor costs, cause customer service to suffer and result in an increase in wageand-hour litigation. 

I am also extremely concerned that the Department expresses throughout the proposed 

regulation its belief that any amount below its proposed salary level would necessitate a more 

rigorous and restrictive long duties test. The realities associated with a more rigorous and 

restrictive long duties test exist regardless of the salary level chosen by the Department. Even if 

the salary level did not increase at all, a more rigorous and restrictive long duties test would still 

place significant administrative burdens on restaurant owners. 

Thus, the Department should leave the concurrent duties rule in place and untouched. 

The concurrent duties test rule recognizes that front-line managers in restaurants play a multifaceted role in which they often perform nonexempt tasks at the same time as they carry out their 

exempt, managerial function. It recognizes that exempt and nonexempt work are not mutually 

exclusive. 

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An Examination of the Overtime Rule 

May II, 2016 

The Department's own Field Operations Handbook highlights that "performing work 

such as serving customers or cooking food during peak customer periods" does not preclude 

exempt status. Exempt supervisors make these decisions while remaining responsible for the 

success or failure of business operations under their management and can both supervise 

subordinate employees and serve customers at the same time. 

The Department's proposed minimum salary level is inadequate for our industry and 

makes the exemption inoperative in my part of the country. 

The Department believes its proposed salary level does not exclude from exemption an 

unacceptably high number of employees who meet the duties test. However, when applied to 

my industry, the contrary is true. 

Even before adjusting for regional economic and market differences, most managers and 

crew supervisors in our industry do not meet the proposed salary level of $970 per week. Some 

of these employees would qualify as exempt under the new proposed salary level only if the 

Department allowed bonuses to be used to calculate the employee's salary level. 

The purpose of setting a salary level, historically, has been to "provid[e) a ready method 

of screening out the obviously nonexempt employees." In other words, the salary level should 

be set at a level at which the employees below it would clearly not meet any duties test. With its 

proposed changes, however, the Department is upending this historic rationale and setting the 

salary level at a point at which all employees above the line would be exempt. This would 

greatly limit employers in the restaurant industry from availing themselves of the exemption. 

For example, the median annual base salary paid to crew and shift supervisors in our 

industry is $38,000. Even those in the upper quartile at $47,000 would not qualify as exempt 

under the Department's proposed $50,440 salary level for 2016. Likewise, the median base 

salary for restaurant managers is $47,000, while the lower quartile stands at $39,000. 

These are employees who would meet the duties test but who would become non-exempt 

under the proposed salary level. It is clear that, at least in reference to the restaurant industry, the 

proposed salary level does exclude from exemption an unacceptably high number of employees 

who meet the duties test. The impact would be magnified in many regions of the country. 

In my own region, the proposed minimum salary level of $50,440 per year would 

represent an outsized income for entry-level managers. These would be the managers entering 

our Managers Training Program at a salary of about $35,000. Generally, these are employees 

that are being promoted, while learning how to perform their new duties. The proposed 

threshold increase (and the lower $47,000 now reported in newspapers) would be too large for us 

to absorb, so those positions would end up being moved back to an hourly rate, which I can 

assure you they would all view as a demotion. 

While this would be an easy transition to make from a management and bookkeeping 

standpoint, it does remove the certainty of a fixed paycheck that they currently have. More 

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An Examination of the Overtime Rule 

May Il, 2016 

problematic is that we use salaried versus non-salaried to set eligibility for extra paid vacation, 

currently as well as management investment/ownership pool and annual profit-sharing bonuses. 

Probably the biggest benefit is the flexibility that we are able to extend to our salaried 

employees, paying full wages while they get to accommodate college schedules-as I once did. 

The ability to delineate programs and perks by salaried versus non-salaried has been a 

great tool for upper management as well as a great benefit for our employees. Setting a 

minimum rate that is inappropriate for entry-level managers will end up reducing the benefits of 

our managers, not because we want to, but because of secondary consequences of the proposed 

changes. 

The National Restaurant Association suggested at least three alternatives considered by 

the Department that would be better options: 

I) "Alternative I" calculated a new salary level by adjusting the 2004 salary level of 

$455 for inflation from 2004 to 2013, as measured by the CPI-U, and results in a 

salary level of$561 per week ($29,250 per year). 

2) "Alternative 2" used the 2004 method to set the salary level at $577 per week 

($30,085 per year). 

3) Understanding that the Department now finds the salary level it set in 2004 as too 

low, the industry is also willing to support "Alternative 3," which would set the salary 

level at $657 per week ($34,255 per year). 

I would like to point out that the Department estimated that 75 percent of newly 

overtime-protected employees would see no change in compensation and no change in hours 

worked based on the proposed regulations. However, in the restaurant industry salaried 

employees enjoy a number of benefits not available to hourly employees, as shown by my own 

example. Thus, in addition to getting paid a salary regardless of the fact that they may not be 

working over 40 hours a week, these newly overtime-protected employees could lose flexibility 

as well as benefits, including substantive bonuses, paid vacation, and flex time. 

Finally, throughout the proposed regulation, the Department created the impression that 

salaried employees feel they are being taken advantage of by virtue of their exempt status. In 

reality, employees often view reclassifications to non-exempt status as demotions, particularly 

where other employees within the same restaurant continue to be exempt. Most employees view 

their exempt status as a symbol of their success within my company. It will be demoralizing for 

people who are working as entry-level managers and'want to continue to move up to now be 

treated as hourly employees. 

Automatic salary level increases will only perpetuate bad policy. 

Putting aside legal objections to the Department's attempt to permanently index the 

salary level, at $47,000 or $50,440, an automatic yearly increase tied to CPJ-U would make the 

exemption perpetually unusable for large portions of our industry. 

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An Examination of the Overtime Rule 

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The Department's other proposed alternative of indexing the salary level to the 40th 

percentile of non-hourly employees is a non-starter. Preliminary research points to it resulting in 

a death spiral that would render the exemption obsolete in just a few years. The relevant data 

used to determine the 40th percentile of full-time salaried workers is found in the Current 

Population Survey from the Bureau of Labor Statistics (BLS). The data consists of the total 

weekly earnings for all full-time non-hourly paid employees. 

As the new salary level becomes effective, the number of workers who report to the BLS 

that they are paid on a non-hourly basis will decrease as workers who fail the salary test in year 

one (and subsequent years) are reclassified as non-exempt. This will result in a dramatic upward 

skewing of compensation levels for non-hourly employees. If the 40th percentile test is adopted, 

in the years following the proposal, the salary level required for exempt status would be so high 

as to effectively eradicate the availability of the exemptions in our industry. 

For example, the Department predicts that the initial salary level increase will impact 4.6 

million currently exempt workers. Employers must then choose to: 

I) Reclassify such workers as nonexempt and convert them to an hourly rate of pay; 

2) Reclassify such workers as nonexempt and continue to pay them a salary plus 

overtime compensation for any overtime hours worked; or, 

3) Increase the salaries of such workers to the new salary threshold to maintain their 

exempt status. 

The Department estimates that only 67,000 of currently exempt workers will see an 

increase in their salaries to bring them up to the new salary threshold in order to maintain their 

exempt status. The overwhelming majority of affected employees would be reclassified as nonexempt. In our industry, particularly under the proposed $970 per week salary level, most of 

these employees will be converted to an hourly method of payment. 

One economic analysis that the Association was able to review states that if just one 

quarter of the full-time, non-hourly workers earning less than the proposed 40th percentile were 

reclassified as hourly workers each year, in five years the new 40th percentile salary level would 

be $1,393 per week ($72,436 per year). The more likely scenario is that an even greater 

percentage of employees would be reclassified from salaried to hourly. If just halfoffull-time, 

non-hourly employees are converted to hourly positions, the 40th percentile salary level would 

increase to $1,843 per week ($95,836 per year) by 2020. 

In the current proposed rulemaking, the Department proposes to announce a new salary 

level each year in the Federal Register without notice-and-comment, without a Regulatory 

Flexibility Act analysis, and without any of the other regulatory requirements established by 

various Executive Orders. 

Conclusion 

The Department should have granted at least as much time as it did in 2004 for the 

regulated community to comment on the proposed regulation, particularly given the proposal's 

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Octavia Mantilla 

An Examination of the Overtime Rule 

May /l, 2016 

complexity and unusual new theories and mandates. Above all, the restaurant industry would 

find the use of a long duties test to be the wrong approach. The Department says it is attempting 

to "modernize" and "simplify" the applicability of the exemption, but a return to a long duties 

test would absolutely nullify any efforts to modify and simplify the rules. However, if the 

Department is inclined to mandate a new duties test, it should comply with all regulatory 

requirements and allow for notice and comment on any specific new duties test proposal. 

In closing, I would like to state that I am not against increasing the salary threshold for 

exempt status, but it has to be a reasonable level so entry-level managers in my restaurant can 

still benefit. I am both proud and grateful for the responsibility of serving America's 

communities--creating jobs, boosting the economy, and serving our customers. My industry is 

committed to working with Congress to find solutions that foster job growth and truly benefit our 

communities. It is part of the Besh Restaurant Group's mission "to encourage growth from 

within and find like-minded partners to take the helm at our restaurants." The proposed overtime 

regulations may end up making it harder for these like-minded partners to move up in my 

company. 

Thank you again for the opportunity to testify before you today regarding my 

industry's concerns with the proposed overtime regulations. I look forward to your 

questions. 

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Chairman VITTER. Okay. Thank you very much, Mr. Mantilla. 

And next we will hear from Mr. Eisenbrey. 

STATEMENT OF ROSS EISENBREY, VICE PRESIDENT, 

ECONOMIC POLICY INSTITUTE 

Mr. EISENBREY. Thank you for inviting me today, Mr. Chairman 

and Committee members. In my 5 minutes, I will make five points. 

First, America’s middle class has suffered through decades of 

wage stagnation and rising inequality that cannot be corrected 

without changes in a range of Federal policies that have worked 

against them. Those changes include: restoring appropriate tax 

rates on high incomes and inheritances, raising the minimum 

wage, fixing overtime rules, enacting paid leave and fair scheduling 

legislation, ending unfair trade practices, and giving employees the 

right to bargain collectively. 

Two, the Department’s updated salary threshold will help. It is 

long overdue and much needed. The rule will raise wages for some 

employees, reduce excessive work hours for others, and create jobs. 

No one paid less than $50,000 a year should work more than 40 

hours a week without additional compensation. 

Three, indexing the salary threshold for exemption as wages and 

prices increase is critically important and well within the Department’s authority. 

Four, employers will adjust to the rule, as they did to the original Fair Labor Standards Act and every improvement in the law 

and regulations since then. California, it is important to note, the 

State with the highest State overtime standards, including a 50- 

percent primary duty test, has outpaced the rest of the Nation in 

employment growth for the last 5 years, and in that period of time, 

Louisiana’s employment has actually fallen. 

Five, small business employees need time with their families just 

as much as employees of larger businesses, if not more. They tend 

to be paid less and, therefore, to be less able to pay for time-saving 

help with children, chores, and home maintenance. They suffer 

from the same stress and health effects as anyone else. 

So, point one, from 1979 to 2013, inflation-adjusted wages rose 

only 15 percent for the bottom 90 percent of Americans, less than 

one-half of 1 percent per year, while wages for the top 1 percent 

increased 137 percent. The economy and total national income 

grew, but most Americans were left out. CEOs and top executives 

take an oversized share of income. CEO pay for the 350 largest corporations grew almost 1,000 percent since 1978 while the pay of 

typical workers increased only 11 percent. 

Corporations have relentlessly squeezed labor costs to the detriment of their employees while increasing profits for shareholders 

and executives with stock options. Profits have been at all-time 

highs while tens of millions of workers struggle to get by. 

The Federal policies that have reduced employee bargaining 

power, lowered labor standards, and offshored jobs should all be reversed. Overtime is one part of the solution. 

The current salary threshold, as Sarita said, is less than the poverty line for a family of four. It does not begin to reflect the status 

and financial reward that characterized executives, administrators, 

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ried employees, in 1979. Today it covers 3.5 million in a workforce 

that is 50 percent bigger. 

Three, Goldman Sachs, the National Retail Federation, and the 

Department of Labor all agree: The rule will lead to job creation, 

wage increases for some employees, and reduced hours for others. 

The history of this rule tells us that employees will be better off, 

and as Lonnie Golden’s research using the General Social Survey 

shows, it is not true that employees who make less than $50,000 

a year have more flexibility if they are salaried than if they are 

hourly. This survey showed without a doubt that they are no better 

off in terms of flexibility, so they have nothing to lose when the salary level is raised, even if their employer changes from salaried to 

hourly. 

To prevent the kind of neglect that led to a 29-year decline in 

the real value of the threshold, it has to be indexed, preferably to 

growth in compensation of salaried employees. The Labor Department for decades failed to carry out its statutory mandate to update the rules, and indexing will prevent that kind of failure in the 

future. 

Finally, employers, including small businesses like mine—we 

have 40 employees—will have no trouble adjusting to the rule because our competitors all face the same requirements, and, in fact, 

this is the easiest rule ever promulgated to comply with. You are 

already making determinations about whether employees are covered. Now for people making less than $50,000, it is simple. They 

are entitled to overtime pay. That is the end of the issue. You do 

not have to worry about the complicated duties test that you have 

heard about. 

The home builders are a perfect example of how much hype and 

phony melodrama surrounds the opposition to this rule. They did 

a survey that shows that only one home builder in 25 is even 

thinking about reclassifying salaried workers as hourly. Far more 

will raise their salaries, but most will have to do nothing at all to 

comply because they are already in compliance. 

Thank you. 

[The prepared statement of Mr. Eisenbrey follows:] 

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Economic 

Policy 

Institute 

Testimony Before the U.S. 

Senate Committee on Small 

Business and 

Entrepreneurship 

Ross Elsenbrey 

Vice President. Economic Policy Institute 

Russell Senate Office Building 

10:00 a.m., Wednesday, May 11, 2016 

Economic Policy Institute· Washington, DC View this testimony at epi.orgf106670 
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Thank you for inviting me to testify today. 

My name is Ross Eisenbrey, and I am the vice president of the Economic Policy Institute, a 

nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middleincome workers in economic policy discussions. EPI believes every working person 

deserves a good job with fair pay, affordable health care, retirement security, and 

work-life balance. 

Work-life balance is a fundamental goal of the Fair Labor Standards Act (FLSA). Because 

of its requirement that employers pay many employees a premium for time worked 

beyond 40 hours in a week, the FLSA is the single most important family-friendly law ever 

passed in the United States. Everyone claims to care about work-life or work-family 

balance, but for many employers, it's just talk, just as it was 75 years ago. If not for the 

law's overtime rules, tens of millions more workers would be working 50, 60, or 70 hours a 

week for no additional pay, just as millions of Americans did before the FLSA was enacted 

in 1938. 

An uninformed person might think the 40-hour workweek most Americans have is part of 

the natural order, but of course it isn't. It exists in the United States because President 

Roosevelt persuaded Congress to pass the FLSA, which-by imposing the duty to pay 

time-and-a~halr for overtime-makes it expensive for a business to work employees more 

than 40 hours a week. (Similarly, the weekend was not a given for most Americans before 

passage of the FLSA.) If the FLSA's regulations are not updated from time to time, as the 

law intends, the 40-hour workweek could become a thing of the past. 

It's critical to remember that there's no inherent difference between an hourly worker and 

a salaried worker. How they are paid is entirely up to the boss. And salaried employees 

need time with their families and time for themselves just as much as hourly workers 

do. Congress recognized this In 1938 and made no distinction: Hourly workers and 

salaried workers alike were entitled to overtime pay, whether they were blue collar or 

white collar, whether they worked in a factory or an office. In fact, some of the most 

exploited workers at the time were women working 12-hour days, six days a week, as 

typists in giant office pools for $6 or $7 a week. 

it's equally critical to remember that the employees who work In small businesses are no 

different from those who work In medium-sized and large businesses; they too need 

time with their families and for themselves. There is no good reason for small businesses 

to exploit their employees, work them excessive hours, or deny them time with their 

families. 

For all of these reasons, the Department of Labor (DOL) should promptly issue its final rule 

to raise the threshold salary, below which all workers are automatically eligible for 

overtime, to $50,440. This would be the most important improvement in the labor 

standards of America's working families in many years. 

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Work-life balance, family 

responsibilities, and personal health 

Having a decent work-life balance, which means having enough time outside of work for 

family and friends, for oneself, and for civic participation, is one of the two key goals of the 

FLSA's overtime requirements. But large percentages of managers and other white-collar 

employees say that increasingly, the law is failing to protect them, that they don't have 

enough time for their families. Alarmingly, parents' hours are increasing more than those of 

non~parents: 

o An Ernst & Young survey found that too little pay and excessive overtime are among 

the three most common reasons employees quit. 

• Approximately half (46 percent) of managers work more than 40 hours per week, and 

four in 10 say their hours have increased over the past five years. 

• Younger generations have seen their hours increase the most in the last five years, at 

a time when many are moving into management and starting families (47 percent of 

millennia! managers reported an increase in hours, versus 38 percent for Gen X 

managers and 28 percent for boomer managers). 

• Of managers, a larger share of full-time working parents (41 percent) have seen their 

hours increase in the last five years than non~parents (37 percent).1 

The Implications of this overwork are obvious in terms of work-life conflict. Who will take 

care of the kids? Who will go to their ballgames, school plays, or counseling meetings? The 

conflict is especially intense because children increasingly have two parents working at 

least 35 hours per week. Ernst & Young finds that "over half (57%) of full-time employees in 

the US indicate that their spouse/partner works 35 hours or more a week, but for 

millennia Is and Gen X, the likelihood that their partner works full-time is much higher than 

for Boomers. Also, parents (70%) are much more likely than non-parents (57%) to have a 

partner that works at least full-tlme." 2 

Specifically: 

• "Millennials (78%) are almost twice as likely to have a spouse/partner working 

at least full-time than Boomers (47%). 

• Millennia Is (64%) and Gen X (68%) were also much more likely to have a 

spouse/partner working 35 hours or more a week than Boomers (44%). 

• Over a quarter of Boomers (27%) said their spouse/partner does not work 

outside the home or works part-time flexible hours (10%). 

• Millennia Is (13%) and Gen X (14%) were much less likely to have a spouse/ 

partner who did not work outside the home or who worked part-time but 

flexible hours (5% and 4% for mlllennials and Gen X, respectively). 

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• 'Finding time for me' is the most prevalent challenge faced by millennia! 

parents who are managers in the US (76%) followed by 'getting enough sleep' 

and 'managing personal and professional life' (67%)."3 

It's not just work-family conflict, stress, or lack of sleep that's at stake; it's also the physical 

health of the workers. Overwork kills. People who work 55 hours or more per week have a 

33 percent greater risk of stroke and a 13 percent greater risk of coronary heart disease 

than those working standard hours.4 When employers don't have to pay for overtime, they 

schedule much more of it, leading to the many stories among the rulemaking comments of 

managers working 60-hour weeks and longer until their health was destroyed, leaving 

them disabled. 

As currently enforced, the FLSA is 

failing salaried workers 

Properly enforced, the Fair Labor Standards Act would prevent a great deal of this 

overwork and stress on families, but the law has been allowed to become almost a dead 

letter with respect to salaried employees. The single biggest reason for this failure is the 

low level of the salary threshold that determines whether workers are automatically 

eligible for overtime pay. As shown in the graph, in 1979 more than 12 million salaried 

workers earned less than the salary threshold and were therefore automatically 

guaranteed the right to overtime pay, regardless of their duties. Today, with a 50 percent 

bigger workforce. only 3.5 million salaried employees are automatically protected.5 

In an excellent comment submitted to the rulemaklng record, 57 legal scholars remind 

us that the basic rule Is that all employees are entitled to tlme-and·a·half overtime pay, 

while the exemptions were meant to be very limited and narrow. For the most part, only 

relatively highly paid employees may be denied overtime pay: 

"Congress' intent was to allow exemptions from the Fair Labor Standards Act's 

overtime and minimum wage protections for a relatively small group of high-paid 

employees who were effectively already being compensated for the extra hours 

that they worked by their high level of compensation. Congress understood that 

these workers had sufficient individual bargaining power in the labor market and 

workplace to protect themselves. and so did not need the government to intervene 

to protect them from employers who might impose low wages and excessive overwork. One very strong indication of a worker's individual bargaining power is the 

salary that he or she can negotiate with an employer. More individual bargaining 

power generally produces a higher salary. Bona fide executive, administrative, and 

professional employees are able to negotiate high salaries because oftheir skills, 

knowledge. close association with powerful corporate leaders and, in many cases, 

limited availability in the labor market. For this reason. we agree with the Wage & 

Hour Division that an employee's salary level should be the most important factor in 

determining whether he or she is an exempt bona fide executive, administrative, or 

professional employee.''6 

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Figure A The Number of Salaried Workers Guaranteed Overtime Pay 

Has Plummeted Since 1979 

Number of salaried workers• covered by overtime salary threshold, 1979-2014 (in 

millions) 

15 

10 

1980 1990 2000 2010 

• The sample included salaried {nonhour!y), full-time workers who are 18 years or older. !t excluded teachers (pre-K 

through college) and religious workers who are automatically exempt from overtime protections. 

Note: The nominal threshold was set at $250 per week from 1975 until 2004 when !twas increased to $455 per 

week 

Source: EP! analysis of Current Population Survey Outgomg Rotation Group microdata 

E(•onomic Polky Institute 

The other purpose of the overtime rules was to reduce unemployment by reducing the 

average number of hours worked in certain jobs, thereby freeing up positions for 

additional workers. To maximize employment, it's obviously better to have three 

employees working 40 hours per week than just two working 60 hours each while the 

third is unemployed. U.S. underemployment is stilt almost 10 percent seven years after the 

end of the Great Recession-that's over 15 million Americans who want a job or more 

hours but have not been able to find them. The black unemployment rate is a recessionlike 8.8 percent. 

The arguntents against raising the 

overtime salary threshold don't hold 

water 

Many businesses are unhappy that the Labor Department is proposing to restore overtime 

coverage almost to where it stood in the Nixon and Ford administrations. Businesses have 

become accustomed to working !ow-level salaried employees long hours for no extra 

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compensation, but the pendulum has swung too far, and it's time to restore some balance. 

The arguments they make against the rule are uniformly without merit. 

Let's examine the four most prevalent of these arguments. 

1. "Regulatory compliance costs will be excessive." 

a. DOL probably overestimated these costs. Every firm that has an 

obligation to comply with the FLSA has already made a determination 

about the duties of its current employees and whether they can be 

exempted under the law's provisions for executive, administrative, and 

professional employees (known as "EAP exemptions"). The proposed rule 

makes this process much simpler for employees earning below the 

threshold. Here's the new test: "Does the employee make less than $970 

per week?" If yes, pay overtime. 

b. DOL said becoming familiar with the new rules would take an hour. but 

in reality, it takes a few seconds, and anyone with ADP payroll processing 

software can make the necessary change in payroll in a few minutes. Even 

the National Restaurant Association's witness at last October's House 

Small Business Committee hearing on the rule admitted that "this would be 

an easy transition to make from a management and bookkeeping 

standpoint." 

c. Going forward, it Is beyond argument that millions of the decisions 

employers make about applying the exemption to employees earning 

above the current threshold but below the new threshold level ($23,660 to 

$50,440) will be made simpler: The complex duties tests that apply above 

the threshold will be irrelevant for those employees, and the only question 

will be, "Does the employee earn a salary less than $970 per week?"" 

d. Converting employees to hourly status is entirely a decision of the 

employer. Overtime can be easily tracked for salaried employees. Many 

employers, including small businesses, track the time of salaried 

employees. At the House Small Business Committee hearing on the 

overtime rule last October. Terry Shea, representing the National Retail 

Federation, revealed that she routinely and closely tracks the time of her 

salaried employees: 

Economic Policy Institute 

"Furthermore, our store managers and assistant 

managers averaged a 40 hour work week last year. 

Management c!o~es the stores two days a week, 

and on those days they come in at 10am and leave 

between 6:15pm and 6:30pm. They also work one 

Saturday a month. for which they are given a day off 

during the week. During 'crunch time' weeks, a 

manager will work more than 40 hours. 
240 

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''However, when any salaried associate works in 

excess of 46 hours in a week, they are compensated 

with a day off of their choosing. 

"This day off may be used the following week or 

'banked' and taken later in the year." 

2. "The regulation will harm relationships between owners and affected employees." 

a. The National Federation of Independent Business (NFI B), for example, 

claims that employee morale will be hurt because employers will not just 

reclassify some managers as hourly but will also demote them, take away 

the manager title, take away their paid time off and their health benefits, 

and stop letting them leave early to pick up their kids from school. All of 

that is pure nonsense. Nothing in the rule makes an employer change a 

manager's title or take away benefits, and it would be poor management to 

do so if it were going to harm morale. 

b. NFIB assumes that businesses will insist that employees continue to 

work long hours and will refuse to pay anything additional for overtime. 

NFIB says employers will cut wages by as much as $5 per hour in order to 

keep their total wage bill unchanged. That has not been the history of the 

FLSA. We know that hourly workers are less likely to work long hours than 

salaried employees, and we have found no evidence that employees' 

wages were ever cut this way in the past. 

3. "The rule will take fiexibllity and opportunities from employees who are converted 

to hourly status." 

a. Research by Lonnie Golden at Penn State shows that employees paid a 

salary less than $50,000 a year generally have no more flexibility than 

hourly workers? 

b. The opportunity argument is indefensible. If my business promotes 

employees paid a salary of $25,000 to $50,000 into management but the 

rule leads me to reclassify them all as hourly, they're •till the same 

employees I would look to for promotion. Where else would I look? If not 

them, then to whom? 

4. "The salary level is set too high for rural areas." 

a. The salary level is meant to do one thing: prevent employers from 

denying a 40-hour workweek and overtime pay to people who aren't really 

executives and professionals. It doesn't set salaries; it reflects what bona 

fide executives, administrators, and professionals are paid. 

b. The $921 weekly level in the DOL:s notice of proposed rulema king 

(NPRM) is not high: it is so low that it isn't sufficient to provide a two-parent. 

two-child family with an income necessary to live adequately yet 

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modestly.8 This is not truly an executive-level salary if an employee in 2014 

could not support a family in a modest way on that salary. 

c. The salary levels since 1938 have been set nationally, without exception. 

d. In infiation-adjusted terms, the equivalent salary level in 1975 would be 

$57,462, according to the U.S. Chamber of Commerce. That level took 

account of regional and urban/rural differences because it was an inflation 

adjustment of earlier levels that took them into account. Regional pay 

differences are much smaller today than in 1975, so the salary level in the 

NPRM actually overcorrects for regional differences. Moreover, the fact that 

the NPRM applies the 1975 level despite decades of productivity growth 

and accelerating income growth for executives means the salary level is 

more likely too low than too high. 

e. The HR Policy Association (HRPA) says that one in seven rural and small 

city CEOs earns less than $940 per week. It's a very misleading portrait of 

their income, if not totally meaningless, because it's based on the Current 

Population Survey report of weekly wage data, which leaves out a lot of 

income-perhaps most of it for CEOs. Here's what's left out: nonproduction bonuses, perquisites, profit-sharing payments, stock bonuses, 

and year-end bonuses. Taking into account their various bonuses and 

perks, it might be that none of them earns less than $75,000 a year-but 

we don't know. 

CEOs are either the business owner. in which case they set their own 

salary and their own schedule, or they are employees of someone else. If 

the business owner isn't willing to pay its CEO more than $50,000, it will 

have to pay overtime. This wlll affect very few businesses. 

f. The HRPA figure of one-seventh of rural and small city CEOs totals 

fewer than 18,000 CEOs, of whom 3,000 are public employees. In a nation 

with more than 7 million businesses, that represents 0.2 percent of firms. 

g. Managers paid less than the level necessary for a two-parent, two-child 

family to make ends meet anywhere in the country, whether they live ln 

rural or urban areas. should not be treated as exempt executives; they 

should be paid for their overtime. 

The Secretary of Labor has done precisely what the law requires in resetting the salary 

test to a level that better reflects the compensation of bona fide executives, administrators, 

and professionals. In doing so, he is making the most important improvement in the labor 

standards of America's working families-particularly middle-class families-in many years. 

The proposed rule should be applauded and supported, and the Secretary should make it 

final. 

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Biography 

Ross Elsenbrey has been vice president of EPI since 2003. He is a lawyer and former 

commissioner of the U.S. Occupational Safety and Health Review Commission. Prior to 

joining EPI, Eisenbrey worked for many years as a staff attorney and legislative director in 

the U.S. House of Representatives, and as a committee counsel in the U.S. Senate. He 

served as policy director of the Occupational Safety and Health Administration from 1999 

to 2001. Eisenbrey has testified numerous times in the House of Representatives and the 

Senate, and has written scores of articles, issue briefs, and policy memos on a wide range 

of labor issues. He holds a J.D. from the University of Michigan. 

References 

t Ernst & Young, Global Generations: A Global Study on Work-Life Challenges Across Generations, 

2015. 

2.1bid. 

3.1bid. 

4. Mika K!vimaki eta!., "Long Working Hours and Risk of Coronary Heart Disease and Stroke: A 

Systematic Review and Meta-Analysis of Published and Unpublished Data for 603,83Bindlviduals,H 

The Lancet, August 20, 2015. 

5. Ross E!senbrey, "The Number of Salaried Workers Guaranteed Overtime Pay Has Plummeted 

S!nce 1979," Economic Policy Institute Economic Snapshot, June 11, 2015. 

6. L. Camille Hebert, et al., "Law Professor Comments Regarding 'Defining and Delimiting the 

Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees," 

submitted to U.S. Department of Labor September 4, 2015. 

7. Lonnie Golden, Flexibility and Overtime Among Hourly and Salaried Workers: When You Have 

Little Flexibility, You Hove Little To Lose, Economic Polley Institute Briefing Paper #385, September 

30, 2014. 

8. Elise Gould, Tanyell Cooke, and Will Kimball, What Families Need to Get By: EPI's 2015 Family 

Budget Colculotor, Economic Polley Institute Issue Brief #403, August 26, 2015. 

Economic Policy Institute 8 
243 

Chairman VITTER. Thank you. 

And, Ms. Duncan, you are going to wrap us up. Thank you. 

STATEMENT OF NANCY DUNCAN, ASSOCIATE VICE PRESIDENT 

OF HUMAN RESOURCES, OPERATION SMILE 

Ms. DUNCAN. I would like to thank the Committee for the invitation to speak with you today. Operation Smile is an international 

medical charity that has provided hundreds of thousands of free 

surgeries for children and young adults in developing countries 

who are born with a cleft lip, cleft palate, or other facial deformities. 

I am here today to express the concerns of our leadership team 

over the Department of Labor’s proposed changes to overtime exemption regulations, specifically, the drastic increase to the threshold salary level of $50,400. 

While all employers will feel the impact of such a drastic change, 

there will be a tremendous negative impact on the nonprofit organizations, especially taking into account the unique challenges of 

an organization operating globally. We have made tremendous efforts over the last years to align our salaries to be more competitive with the for-profit space. Yet still, this proposed update will increase our payroll cost nearly $1 million annually, affecting over 50 

percent of our workforce. This is not a financial cost we can absorb. 

Considering that a cleft surgery costs an average of $240, this 

would mean nearly 4,200 fewer surgeries provided globally each 

year. 

Let me take a moment to provide a very specific impact of the 

proposed increase to the salary threshold. The largest group of our 

professionals affected is our program coordinators. These individuals are responsible for planning and executing our international 

medical missions. They travel to low- and middle-income countries 

where we conduct medical missions, and they have responsibility to 

manage our medical teams. Our program coordinators are often 

working in mission countries with the ministers of health, leaders 

in the local hospitals, and even high-level government officials who 

support our cause. The program coordinator position at Operation 

Smile has served as a training ground for many young professionals with a career goal to continue on to law school, medical 

school, and many other professional careers. The experience they 

receive at Operation Smile is unprecedented and highly valued. 

Annually, we receive approximately 700 applicants for these positions. Their qualifications are incredible, many graduate degrees, 

multiple languages, leadership positions throughout their academic 

life, and thousands of volunteer hours. If this new policy is implemented, we fear we will have to look to other resources such as hiring in our mission countries. This change would unfortunately reduce the employment opportunities for recent college graduates. It 

would be a shame to take this opportunity away. 

Less measurable is the impact this change will have on our support staff for a global organization that operates 24/7. Many of our 

exempt positions have enjoyed schedule flexibility and need the 

ability to work with partner countries remotely at hours often outside our normal office schedule. If we have to convert these employees to nonexempt status, we will have to impose policies such as 

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strict core working hours and restrictions on email and phone 

usage after hours. The result would be a negative impact on both 

our responsiveness and effectiveness. Our focus needs to be on 

managing programs not overtime. 

There are additional obvious flaws to the proposed 102-percent 

increase to the minimum salary level. At Operation Smile, we offer 

employees a rich medical and dental plan with their employee premiums covered at 100 percent. In addition, we provide a 401(k) 

plan with up to a 9-percent employer contribution. These are all 

areas we will have to turn to and evaluate cuts to offset increased 

salary expenses. 

Another flaw is the lack of consideration of geographic location. 

Regional economies play a part in starting salaries. According to a 

website source, a salary of $50,400 in Washington, D.C., equates to 

an approximate salary of $34,000 in Virginia Beach. 

Finally, we are extremely concerned about the impact this will 

have on our donations. Donors evaluate the percentage of resources 

spent on administrative versus programmatic activity. An increase 

in administrative cost will have a negative impact on our revenues 

from donors who want their donations spent on surgeries not salaries. 

We strongly urge the DOL to re-examine the newly proposed salary threshold, taking into consideration the many negative impacts 

such a change will present. These changes should be adjusted to 

reflect a better balance between employer and employee needs, a 

nonprofit’s charitable mission, and donor expectations. At the very 

least, we request the DOL pursue adopting special provisions similar to those found for teachers by allowing nonprofits to remain exempt from these salary thresholds and to be better able to focus on 

their charitable missions. 

Thank you for allowing me to be here today to speak to you in 

regard to the nonprofit community. 

[The prepared statement of Ms. Duncan follows:] 

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Nancy Duncan 

Associate Vice President of Human Resources 

Operation Smile 

May 11, 2016 Written Testimony 

I would like to thank the Committee on Small Business and Entrepreneurship and 

Senator Vitter for the invitation so speak to you today. 

Operation Smile is an international medical charity that has provided hundreds of 

thousands of free surgeries for children and young adults in developing countries who 

are born with cleft lip, cleft palate or other facial deformities. It is one of the oldest and 

largest volunteer-based organizations dedicated to improving the health and lives of 

children worldwide through access to surgical care. Since 1982, Operation Smile has 

developed expertise in mobilizing volunteer medical teams to conduct surgical missions 

in resource-poor environments while adhering to the highest standards of care and 

safety. Operation Smile helps to fill the gap in providing access to safe, well-timed 

surgeries by partnering with hospitals, governments and ministries of health, training 

local medical personnel, and donating much-needed supplies and equipment to 

surgical sites around the world. Founded and based in Virginia, Operation Smile has 

extended its global reach to more than 6o countries through its network of credentialed 

surgeons, pediatricians, doctors, nurses, and student volunteers. 

I am here today to express the concerns of our leadership team over the Department of 

Labor's proposed changes to overtime exemption regulations. Specifically, the drastic 

increase to the threshold test to a salary level of $50,400. 

While all employers will feel the impact of such a drastic change, there will be a 

tremendous negative impact on non-profit organizations, especially taking into 

account the unique challenges of an organization operating globally. We have made 

tremendous efforts over the years to align our salaries to be more competitive with the 

for-profit space. Yet still, this proposed update will increase our payroll cost by nearly 

$1 million annually affecting over so percent of our workforce. This is not a financial 

cost we can absorb. Considering that a cleft lip surgery costs an average of $240, this 

would mean nearly 4,200 fewer surgeries provided globally each year. 

Let me take a moment to provide a very specific impact of the proposed increase to the 

salary threshold. The largest group (about thirty) of our professionals affected is our 

Program Coordinators. These individuals are responsible for planning and executing 

our international medical missions. They travel to low-and middle-income countries 

where we-<:onduct medical missions and they have responsibility to manage our 

medical teams. Our Program Coordinators are often working in mission countries with 

Ministers of Health, leaders in the local hospitals and even high level government 

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officials who support our cause. The Program Coordinator position at Operation Smile 

has served as a training ground for many young professionals with a career goal to 

continue on to law school, medical school and many other professional careers. The 

experience they receive at Operation Smile is unprecedented and highly valued. 

Annually we receive approximately 700 applicants for these positions. Their 

qualifications are incredible including many graduate degrees, multiple languages, 

leadership positions throughout academic life, and thousands of volunteer hours. If 

this new policy is implemented, we fear we will have to look to other resources such as 

hiring in our mission countries. This change would unfortunately reduce the 

employment opportunities for recent college graduates. It would be a shame to take 

away this opportunity. 

Less measurable is the impact this change will have on our support staff for a global 

organization that operates 24/7. Many of our exempt positions have enjoyed schedule 

flexibility and need the ability to work with partner countries remotely at hours outside 

of the normal office schedule. If we have to convert these employees to a nonexempt 

status, we will have to impose policies such as strict core working hours and restrictions 

on email and phone usage after hours. The result would be a negative impact on both 

our responsiveness and effectiveness. Our focus needs to be on managing programs 

not overtime. 

Think about it, when disaster struck Haiti in 2010_, our employees said "we can help, we 

can put together a surgical mission. They need our help." They didn't ask "are you going 

to pay me extra?" The unintended consequences of these proposed regulations would 

crush our ability to respond. 

There are additional obvious flaws to the proposed 102% increase to the minimum 

salary level. At Operation Smile, we offer our employees a rich medical and dental plan 

with their employee premiums covered at 1oo%. In addition, we provide a 401(k) plan 

with up to a g% employer contribution. These are all areas we will have to turn to and 

evaluate cuts to offset increased salary expenses. Another flaw is the lack of 

consideration of geographic location. Regional economies play a huge part in starting 

salaries. According to a website source, a salary of $50,400 in Washington, D.C. 

equates to an approximate salary of $341ooo in Virginia Beach. 

Finally, we are extremely concerned about the impact this will have on our donations. 

Donors evaluate the percentage of resources spent on administration versus 

programmatic activity. An increase in administrative cost will have a negative impact 

on our revenues from donors who want their donations spent on surgeries not salaries. 

We strongly urge the DOL to re-examine the newly proposed salary threshold, taking 

into consideration the many negative impacts such a change will present. These 

changes should be adjusted to reflect a better balance between employer and 

employee needs, a non-profits' charitable mission and donor expectations. 

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At the very least, we request the DOL pursue adopting special provisions similar to 

those found for teachers by allowing non-profits to remain exempt from these salary 

thresholds and to be better able to focus on their charitable missions. 

Thank you for allowing me to be here today as the voice of the nonprofit community. 

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operationsmile.org 
248 

Chairman VITTER. Thank you very much, and thanks to all of 

you. I will start our discussion with 5 minutes of comments and 

questions. 

Ms. McCutchen, you were Wage and Hour Administrator at the 

Department of Labor previously. If at that time SBA’s Office of Advocacy had sent you a letter similar to the one sent to Secretary 

Perez that was critical of the proposed rule and that asked for 

more comment time, what would your reaction have been? 

Ms. MCCUTCHEN. We would have sent our economists back to 

work. The flexibility regulatory impact analysis is particularly important to the small business community. It has to be accurate. 

You have to be able to accurately estimate the cost, both in the cost 

of compliance and in wage transfers. And so we would have gone 

completely back to the board. And I think if you compare the economic analysis from our regulation in 2004 to what the Department of Labor has put out today, you will see that we did a much 

better job. 

Chairman VITTER. And also specifically with regard to a request 

for an extension of the comment period, what was your experience 

at the Department of Labor? 

Ms. MCCUTCHEN. We did grant an extension, and we gave more 

time to begin with. These rules are complex. There is a lot of time 

and study that needs to go into determining what the impact is 

going to be on your business or your industry. So a 90-day comment period, which is all the Department of Labor gave us, was incredibly inadequate, and there were over—from my reading of the 

public record, there were over 3,000 requests to extend the time for 

comment, and they were all ignored. 

Chairman VITTER. Okay. Thank you. 

If we can put up the chart we have somewhere, do we have that 

handy? Ms. McCutchen, you touched on one thing that I am really 

concerned about, representing the State of Louisiana, which is a 

relatively low-wage State, and that is sort of disparate impact on 

lower-wage areas. Could you comment a little bit more on that? 

And as background, I want to point out that, according to a study 

by Oxford Economics, Louisiana would have nearly 51 percent of 

full-time salaried workers below this dollar level proposed. So what 

effect do you think this rule would have on potential growth for 

small businesses specifically located in a State like that which tend 

to be in the red? 

Ms. MCCUTCHEN. I think it is going to stifle growth, job growth, 

in an economy that is already sluggish, and jobs, and in particular, 

full-time good jobs, right? We might see growth in part-time jobs 

and jobs without health care, but not in good jobs. And just that 

report from Oxford, what you see in the percentages of that report 

is states like Louisiana, you are right, it is about 51 percent of salaried workers who will be impacted. Contrast that to a higher-wage 

State like Massachusetts, where only 27.3 percent of salaried employees are below that $50,440. So it is not 40 percent—right?—if 

you look at state by state. It is 27 percent in some states, 52 percent in others, depending upon whether they are rural or more 

urban states. And so I think that every business owner, every representative of employers and employees in states like Louisiana, 

Arkansas, and Mississippi have to be incredibly concerned that 

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their states are going to be disproportionately impacted in a way 

that is going to really freeze job growth. 

Chairman VITTER. All right. Okay. Thank you. 

Mr. Mantilla, thank you for your testimony. Obviously, the restaurant and hospitality industry is enormously important in Louisiana, as in other places. Do you believe these proposed changes 

to the overtime threshold would make it harder to attract and train 

new managers in your restaurants? 

Mr. MANTILLA. Yes, I do. A company like myself and most of the 

restaurant industry, for entry-level managers it is an opportunity 

that we seek when we are hourly employees. By increasing that 

salary level so high, it forces our restaurants to put a lot more people in hourly positions, so we lose the opportunity for people that 

want to grow to move into salaried. That is what we look for. When 

I was waiting tables, I wanted to be a manager. It will be demoralizing for my entry-level positions to move them back into hourly 

positions. That is what we want. And we are in our industry because we have a passion for it, not because we are doing it for the 

sake of doing it. 

You see the growth especially in New Orleans, from pre-Katrina 

number of restaurants and the opportunities. We had 800 restaurants in New Orleans, to 1,400 now, and it is people like myself 

that were young, eager, and wanted to take the opportunity. The 

restaurant industry is very similar—it is just like the United 

States. It is an industry opportunity. And we want to take the 

chance to become entry level, and a restaurant cannot afford to pay 

$50,445. 

Chairman VITTER. And to take you yourself as an example, you 

went from a very entry level hourly position to manager to owner 

of a group. Do you think this sort of proposal, had it been in place 

at the time, would effectively have been a much bigger barrier to 

that sort of progression? 

Mr. MANTILLA. Yeah. Being a salaried employee, it gave me the 

flexibility to attend school, to attend college, to further my education. I could not go to work 8 hours a day, you know, all the time. 

I woke up in the morning at 6:00 a.m., took classes at 8:00 a.m., 

went to work at a restaurant, managed a shift, went back to school, 

studied, took more classes, or worked Friday, Saturday, and Sunday so that I can further my education, which allowed me to take 

the risk and be an entrepreneur, which was my dream. And we 

started one restaurant, and everybody in my company has developed from within. We have given the same opportunities that I 

took when I was a young boy to be part of a restaurant. And every 

restaurant we own, we have people that were entry-level that are 

now part owners in our business. A perfect example is Alon Shaya. 

Chairman VITTER. Thank you very much, and, again, congratulations on that recognition for Shaya. 

Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

To start out, I just want to kind of make it clear. I, too, am concerned that the small business advocacy group did not get a chance 

to provide comment. I think that with further debate we might 

have gotten more clarification on the need for this rule. 

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But, Ms. McCutchen, right now the rule sets at, I think, $11.38 

an hour. In North Dakota, the extension agency at NDSU does a 

study. They do a study that involves a single mom, two kids, living 

in a very modest apartment with a very small car, spending only, 

I think, $50 a week on clothing. How much do you think they calculate in Fargo she needs to earn to make ends meet in a 40-hour 

work week? 

Ms. MCCUTCHEN. I am not aware of that study, so I do not know. 

Senator HEITKAMP. Okay. Well, I will tell you. It is $24 an hour 

just to make ends meet. So what do you think the number should 

be? 

Ms. MCCUTCHEN. I think the number should be $35,000, but let 

me—— 

Senator HEITKAMP. How do you calculate that? 

Ms. MCCUTCHEN. Based on past methodologies and the data that 

we have about wages and lower-income states and small businesses. I will point out, please, that North Dakota under their 

State law, if it makes sense in the economy in North Dakota, can 

adopt a higher salary level, as has New York and California, New 

York at $35,100 and California at $41,600. And so if that works in 

North Dakota at that level—it probably will not work in Louisiana, 

and that is why the Federal level has always been set at a lower 

level to exclude only—— 

Senator HEITKAMP. But I am telling you that economists in 

North Dakota have looked at what would be, in fact, a 40-hour living wage for a single mom, and they have calculated it at $24 an 

hour. And that is the challenge that we have here. We have got a 

process problem with this rule. But we have an economic problem 

for middle-class families in this country who struggle every day to 

make ends meet. 

And think about this: That same mom, if she works in a salaried 

position, she cannot get a second job if she is working 60 hours a 

week. So she is stuck. In fact, she is worse off. 

And I think the other point that we need to make is that no one 

is telling anyone that they have to go on an hourly wage. No one 

is saying that. They are just saying if they are a salaried employee 

making less than this, they can only work 40 hours a week, right? 

Is that a correct analysis? 

Ms. MCCUTCHEN. Correct. 

Mr. EISENBREY. Well, we can actually pay overtime to salaried 

workers. 

Senator HEITKAMP. Right. My point is that I do not think that 

we have enough information, and so I am a little disturbed by the 

process here because I do not think that we really know how many 

people will be impacted by this and what the consequences will be. 

I am concerned about what happens in universities. That is who 

I have heard from the most. I am concerned about what happens 

in nonprofits where people have to be on call, people who work 

with the homeless, people where it is very difficult to calculate 

what, in fact, would be their hourly wage. 

So I think we have got some issues with this rule. But I think 

we have to acknowledge that what we have here is a dramatic 

problem with people not working as hard as they know how to 

work, getting up every morning and doing a great job, and getting 

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further and further behind. And you do not have to look any further than this Presidential campaign to understand the challenges 

and, I think, the insecurity that American families feel in these 

kinds of situations. 

And so where I share the concern and I think Senator Scott has 

expressed some concern about process, I share the concern about 

process. I think this is a pretty dramatic increase to do it in a way 

that does not allow full analysis and full response. But I am concerned about maybe the general overall attitude of, ‘‘Suck it up, 

workers, just work harder,’’ and you will get further behind. And, 

oh, by the way, if you work in a nonprofit where you do tremendous benefit for society, you should even get paid less. 

So it is a real challenge that we have here. I think that we need 

to put this in the perspective of what this hourly wage is and what 

it means for an American family. And I think $24 an hour for 

somebody who works 40 hours a week and is struggling—you 

know, maybe they should have an opportunity to get a second job, 

and that is not exactly possible when you are working 60 hours a 

week. 

Chairman VITTER. Senator Scott. 

Senator SCOTT. Thank you, Mr. Chairman. Thank you for holding this very important hearing. And, Senator Heitkamp, I am 

looking forward to continuing our discussion on this legislation that 

I have sponsored. I look forward to you being one of our cosponsors 

in the near future. We have 36, but we could use 37. You could be 

the one. 

Thank you to the panelists for being here this morning as well 

as we discuss such an important issue, and I will tell you that having listened to the comments of some of the panelists, I wonder 

where the real world is because the comments are so far apart. 

And the reality of it is having been a small business owner, having 

been a business owner with 5 employees in one company and 7 or 

8 in another and then 15 or so, the fact of the matter is that when 

you think about the impact of this rule on the average person, not 

on the nonprofits specifically, not on the universities, not on small 

businesses, but on employment opportunities, they are going to go 

down, not up. What we will see is more part-time employees. 

If you think about the current state of affairs for small businesses to digest, the ACA pushes wages down, pushes hours down. 

If you think about Dodd-Frank and the ability to have access to 

capital so that there are more small businesses in distressed communities, not growing. I think in 2015 we saw fewer businesses, 

not more businesses, much in part because of the impact of the regulatory environment. 

As I have thought about some of the comments I have heard, the 

only word that keeps coming to my mind is, ‘‘Hogwash.’’ I am not 

sure if they have ever actually been in the real world working. It 

appears to me that perhaps you have not. 

Ms. McCutchen, a couple questions for you, one on the impact of 

geography. I think the fact of the matter is that thinking of this 

from a Federal perspective, having a low point where states can 

figure out what is best for their states based on their geography, 

based on their wages, is an important consideration. 

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The second question I have is one on the flexibility. I heard 

someone mention the fact that salaried employees have just as 

much flexibility as folks who are hourly, or the hourly workers 

have as much flexibility as ones that are salaried. In my business 

where I had salaried employees, they had a whole lot more flexibility than the hourly folks. 

Ms. MCCUTCHEN. You are exactly right, and that is because of 

what we call the ‘‘salary basis test,’’ which is one of the tests from 

exemptions. If you are an exempt employee, you have to be paid 

a guaranteed salary, regardless of the number of hours you work 

a week. So the quid pro quo here is that an exempt employee does 

not receive overtime for working over 40, but they also do not receive less pay for working under 30. So unlike an hourly employee 

who is only paid for the hours you work, if you need to go home 

early to deal with a family issue, to go to a child’s sporting event, 

you can leave, and your employer cannot dock your salary. You are 

going to get that same guarantee week in and week out, and that 

is very valuable and valued by exempt employees. 

Senator SCOTT. The assignment of duties concerns me as well because when you look at a small business owner like I was, five employees, my managers had to do some work that perhaps they 

would not have had to do if we were—in our busy season, everyone 

worked a little harder. When it was slower, you had more flexibility. And you went to more soccer games, you went to more dental appointments, and you still got paid the same amount. 

I think that when you look at the impact of the assignment of 

duties and the impact this rule will have on the classification, you 

will really have many people making the decision it is just not 

worth it. So the reclassification process will be expensive. The employers will have to bear more costs. The employees will have fewer 

dollars to take home because they will be working fewer hours. 

Ms. MCCUTCHEN. Absolutely. In fact, some of our panelists in 

their written comments basically said reclassification is like flipping a switch; it takes only minutes. And I say that is hogwash. 

And those people have never actually helped an employer reclassify. I have—dozens and dozens and dozens. It is at least a 6- 

month process, and it requires a tremendous amount of decisions. 

You do not just flip a switch and say, hey, somebody is going to 

be hourly. You have to figure out: Are they going to be hourly or 

salaried? How much is the hourly rate going to be? Am I going to 

continue to pay benefits or not? Do I have to change my benefit 

plans because their eligibility provisions say only exempt employees? 

Then you have to think about are you going to give people— 

changing your policies, right? All of a sudden, you have to pay 

these people for travel time, for time they spend on their emails 

and on their smartphones after work. So you have to look at all of 

your policies. You might have to reprogram your timekeeping systems and your payroll system. 

It is a huge and complex process, which the Department of Labor 

thinks is going to take an hour. 

Senator SCOTT. Hogwash? 

Ms. MCCUTCHEN. Hogwash. 

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Senator SCOTT. There has been some confusion from listening to 

all of the comments on the impact that this rule will have on nonprofits. On the one hand, you hear from Ms. Duncan’s organization, 

you hear from the Red Cross, the YMCA, expressing very serious 

concerns about a drastic and abrupt increase in the threshold. 

At the same time, on the other hand, there have been some reports that many nonprofits are not covered by the FLSA and will 

not be impacted by the change. I was hoping, as a former Wage 

and Hour Administrator, you might be able to provide some clarity 

on this issue. 

Ms. MCCUTCHEN. Well, the challenge for nonprofits is they do 

not generate revenue from selling, right? So you hear about people 

from the Fight For $15 and other things. Do not worry. For-profit 

companies, all they have to do is raise their prices. But, unfortunately, with nonprofits, they do not have that option. They operate 

on Government funding and donations. 

I was talking to Ms. Duncan earlier today, and she said, you 

know, their 2017 budget is already done. They have no more 

money. And that is why she is contemplating cutting benefits. 

And in Ms. Gupta’s written comments, and what she said today, 

well, we just ask states for higher reimbursement rates for Medicaid. Really? Is that going to happen? What is the reality that nonprofit disability service providers are going to get increased reimbursement rates in order to increase the money they have to pay 

their employees? It is not going to happen. 

Senator SCOTT. I am out of time. 

Chairman VITTER. Okay. Thank you. 

As I turn to Senator Cardin, I am going to ask Senator Scott to 

take the chair so I can vote relatively early on the floor and come 

back immediately so we do not have to interrupt this hearing for 

the floor vote. 

Senator Cardin. 

Senator CARDIN. Well, thank you, Mr. Chairman. And I just really wanted to come by to show my support for this hearing. I think 

it is important that the Small Business Committee is holding a 

hearing on the impact of regulations, particularly as it relates to 

small companies. I know that we have gotten a little bit of drift 

from just small companies, but I think there is—I was listening to 

Senator Heitkamp, and I agree with much of what she said. 

Here is the challenge. The challenge is that we have a growing 

economy, but not everyone has been able to benefit by the growing 

economy. And Congress has taken little initiative to deal with some 

of the fundamental issues that would allow for the mobility that 

you were referring to from the restaurant work that you did. You 

need to have access to affordable higher education. You need to 

have protection as far as being able to work the hours that allow 

you to be able to do that. You have got to deal with potential 

abuses within the workforce. And those are some of the issues that 

we need to deal with. We need a Tax Code that provides an incentive for you to be able to benefit from your own skills. 

And I do not begrudge the Administration trying to deal with 

these issues, and the overtime rule is one of those examples to try 

to deal with it. And, yes, we can talk about how they draw the line 

and whether it is done right or wrong. And I agree with Senator 

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Heitkamp that we need to have an open process, and I very much 

welcome the comments that have been made here today. 

But the bottom line is that Congress has not really been as definitive as they need to be in some of these workforce issues. We are 

the legislative branch of Government. We are the ones who should 

be trying to come to a consensus here. But instead it looks like we 

are not working towards that type of consensus. And, Senator 

Scott, I applaud your efforts trying to reach out across party lines 

to get some of these issues resolved. 

Senator SCOTT. Yes, Senator. 

Senator CARDIN. So I look forward to the discussion. I do think, 

though, that we have to deal with some of the points that Senator 

Heitkamp mentioned, and that is the general frustration that is 

out there. We see that is very evident in this campaign cycle, and 

it is an area that I think this Congress needs to deal with. 

I thank you all for being here. 

Mr. EISENBREY. Senator, could I just answer a couple of things 

that have been said to try and correct the record on a couple of 

things? 

Senator CARDIN. I would be glad to let you do that. I have 2 minutes left. 

Mr. EISENBREY. Okay. The notion that somehow this is a change 

in how we deal with local areas, Senator Heitkamp is exactly right. 

We looked all across the country, including Louisiana. There is no 

place where you can earn an executive salary at less than the level 

that the Department of Labor suggested because a basic family 

budget is, as she said, close to $50,000 everywhere in the country. 

But the fact is that all the Department did was try to restore 

what we used to have in this country, which was a rule that said 

most salaried workers are entitled to overtime pay, and that was 

the rule from 1938 until 1975, and we lost sight of that. That 50 

percent, big deal that 50 percent of salaried employees would be 

covered by the rule in Louisiana. It used to be 60 percent nationwide. 

So we are just trying to get back—the Department is moving us 

not all the way back to where we were. This is not even a full inflation adjustment. 

Senator CARDIN. I agree with that point. The point I was trying 

to raise is that if Congress through the Tax Code, the Earned Income Tax Credit, through the Child Tax Credit, we could strengthen the ability of families to be able to have the budget they need. 

So it is not just working through the executive branch. Congress 

also needs to be paying attention. 

Mr. EISENBREY. Absolutely. 

Senator SCOTT [presiding]. Senator Rubio. 

Senator RUBIO. Thank you. 

Ms. Duncan, one of the overlooked downsides of this regulation 

is the effect that it is having on nonprofits. In Florida I have had 

a number of important communities—we have an important community of nonprofits, and I have had a number of them, care providers for children and adults with developmental disorders, that 

are telling us they would be forced to relocate current patients and 

would have to reduce the number of the disabled that they take in 

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their doors. This rule is most disruptive for the patients that depend on these services. 

So in your testimony, you state that the flexibility of your employees is key to your ability to help the population you serve. In 

the nonprofit sector, rigid corporate schedules do not always apply 

to people who choose to work for your organization out of their desire to help people, not just for a salary. 

How key is pay flexibility to the kinds of people that you employ? 

And, therefore, what impact will this have? 

Ms. DUNCAN. For pay flexibility or hour flexibility? 

Senator RUBIO. Both, but hours especially. 

Ms. DUNCAN. We are a global organization in over 60 countries 

around the world, and many of our employees are working with individuals at these foundations, and so the ability to have a conference call with China, almost 12 hours ahead of us, is key to be 

responsive to the needs they have at the time instead of waiting 

12—by the time we have come in to work 12 hours later. And while 

we could still consider that time and pay overtime, it certainly provides quite a burden to constantly have to figure out how we do 

that, how we clock in, how we count those hours. 

So I think that flexibility—I think most of our employees are professionals. I would say over 90 percent have college degrees and are 

on a professional track. And really even the motivation or the desire to be in that more professional position, I think it would be 

very de-motivating if they had to turn around and now all of a sudden be considered either nonexempt or the impact of us meeting 

the salary requirements. 

As I stated, we have come a long way. I think traditionally there 

was an idea that, hey, we are doing great work so you should feel 

good at the end of the day and we can pay you nothing. We have 

come a long way since then, and many nonprofits are very competitive salary-wise. And the responsibility that our folks have is huge, 

and they need the flexibility to get that work done without asking 

permission. 

Senator RUBIO. But just based on what you said, the implementation of this rule as currently anticipated would be deeply disruptive to work schedules and the ability to provide services. At least 

that has been the testimony we have gotten from multiple nonprofits throughout Florida, and I would imagine—from your testimony, I gather you are saying that would be as well. 

Ms. DUNCAN. Yes, because we would have to, you know, from a 

financial standpoint look at how we cover the cost of any increases 

if we increase salaries, so that is fewer surgeries because our fiscal 

year budget is already done, and unless a donor comes up and says, 

‘‘Okay, here, I am going to fund your changes,’’ which is most likely 

not going to happen in the next month, so we would have to reduce 

the number of surgeries that we are providing. Or we would have 

to look at, alternatively from offering the jobs in-country, coming 

up with a way to hire in-country candidates, which would not be 

the level of—we like the training and the corporate environment of 

having people here at our headquarters. 

Senator SCOTT. Thanks, Senator Rubio. 

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One more question, from me at least, for Ms. McCutchen. Can 

you talk about the practical implications of the automatic increases? 

Ms. MCCUTCHEN. Well, the practical application is in the past 

there have been changes to these regulations, salary increases generally every 5 to 9 years, duties test changes less often. But every 

time there is a change, an employer has to do an analysis. Which 

employees can still be exempt? And which one of them do I need 

to reclassify? And then for the ones they are going to reclassify, 

they go through what in my experience is a 6-month process to implement that reclassification. 

Imagine having to do that every single year. No employer 

today—actually, one employer that I know of today does—reviews 

on an annual basis their exemptions. So that is something totally 

new. It is going to have a lot of costs and a lot of time, and costs, 

by the way, which the Department of Labor has not analyzed whatsoever in their proposal. They only analyzed first-year costs, not 

taking into account that this is—with the annual increases, this is 

going to happen every single year. You are going to have the same 

problems, the same decisions, the same issues with: Do I reduce my 

employees? Do I reduce my surgeries? How am I going to pay for 

it? 

Senator SCOTT. Thank you. 

Mr. Mantilla, businesses in South Carolina, certainly restaurant 

businesses in South Carolina, the goal is always to move from 

where you start, perhaps washing dishes and cleaning tables, to 

being in a position where you are in management and then perhaps ownership one day. It appears to me that the pipeline of opportunities starts to vanish as we see more and more red tape from 

the Federal Government. Your competition no longer is simply 

other businesses, other restaurants, but the oppression sometimes 

it feels like that comes from the red tape in Government also creates a competitive disadvantage from my perspective. 

Mr. MANTILLA. It does. 

Senator SCOTT. Could you talk about that a little bit? 

Mr. MANTILLA. Yeah, especially in our industry, entry-level jobs, 

management jobs, when you go from—and, remember, the restaurant industry is an industry where you do not even have to 

have advanced degrees to be an owner, to be an entrepreneur, to 

reach the American Dream. You can be a waiter and take that 

entry-level position, which probably pays less while you are waiting 

tables at $38,000 a year on average, and get on-the-job training on 

managing, on timekeeping, on labor costs, on food costs. And you 

are doing that. You do that because you want the opportunity to 

be able to move on. 

Once you increase the level to a point that restaurants cannot afford to pay $50,000 a year for entry level, what happens is we have 

less of those jobs. That is what is going to happen to my restaurants. We cannot bring in an entry-level, which that person 

wants the opportunity to come in at $38,000 a year and do on-thejob training so that they can own their own restaurant or they can 

move into management or they can move up to a managing partner 

or it can be a profit-sharing manager, and it leads to further 

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257 

growth. Well, if that opportunity, that middle level, is gone, then, 

yes, there are no more opportunities. 

Senator SCOTT. Yes. Thank you very much. There is one thing for 

certain. Our economy is growing at an anemic rate. I think it was 

0.5 for the first quarter. There are at least 6 million people who 

are involuntarily working part-time because of the absolute oppressive environment that we have in this country from Government 

red tape. 

I think this has been a fairly informative hearing. Thank you all 

for your participation, and we look forward to working with Committee members to find additional ways to protect small businesses 

and ensure their voice is heard in the Federal rulemaking process. 

This hearing is now adjourned. Thank you. 

[Whereupon, at 10:40 a.m., the Committee was adjourned.] 

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(259) 

APPENDIX MATERIAL SUBMITTED 

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Opening Statement by Senator Jeanne Shaheen: 

"An Examination of the Administration's Overtime Rule and the Rising Costs of Doing 

Business" 

Senate Committee on Small Business and Entrepreneurship 

May II, 2016 

Thank you, Chairman Vitter. I want to start by noting that in the Senate Armed 

Services Committee, of which I am a Member, we are debating and voting on the 

National Defense Authorization Act all day. As a result, I am unable to stay at this 

hearing. But I do want to thank all of our witnesses for participating this morning. 

The Fair Labor Standards Act was enacted in the midst of the Great Depression 

to provide greater protections for workers and to prevent unfair employment 

practices that could have a stifling economic effect on the economy. This law 

established the standard 40-hour American workweek, and ensured that employees 

receive overtime compensation for hours worked in excess of that standard. 

However, the strength of the rules that govern which workers are eligible for 

overtime pay have eroded over the last forty years, and as a result, far too many 

Americans are working harder and harder for less and less pay. In fact, in the mid1970s, 62 percent of salaried workers were eligible for overtime pay. In 2013, that 

number had fallen to just 8 percent. 

The Fair Labor Standards Act's overtime protections are a linchpin of the 

middle class. The failure to keep the salary level requirement up-to-date has left 

millions of salaried workers without this basic protection. In America, we pride 

ourselves on the principle that hard work pays off, and I think we can all agree that 

when workers put in extra time on the job, they should be paid fairly for it. 

The Department of Labor's proposal to strengthen overtime protections will 

increase wages and economic security for nearly 5 million workers across the 

country in its first year of implementation. In my home state of New Hampshire 

alone, it is expected to help 20,000 workers. This wide-reaching effect will in turn 

strengthen our economy by increasing consumer spending and encouraging 

employers to create additional jobs. 
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Despite, the potential positive economic gains of this rule, there is concern 

about its impact on a number industries and the compliance costs on small 

businesses in particular. I am confident that this hearing will help us gauge the true 

costs of the rule on small businesses and determine how the Administration can 

best move forward with its implementation. 

I appreciate the time and expertise of all our witnesses today. I would 

particularly like to welcome Ms. Sarita Gupta, the Executive Director of Jobs with 

Justice. Ms. Gupta is a nationally recognized expert on the economic, labor and 

political issues affecting working people across all industries, particularly women 

and those employed in low-wage sectors. We are grateful that she is able to bring 

the voice of the millions of affected of workers to this discussion. 

I'd also like to welcome Mr. Ross Eisenbrey, the Vice-President ofthe 

Economic Policy Institute. Mr. Eisenbrey is a lawyer specializing in labor and 

employment law and is also a former commissioner of the U.S. Occupational 

Safety and Health Review Commission. Prior to joining EPI, he worked for many 

years in the U.S. House of Representatives and served as policy director of the 

Occupational Safety and Health Administration from 1999 unti12001. 

I want to thank them both for joining us today and I look forward to hearing 

from all of our witnesses. Thank you, Mr. Chairman. 
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Building Success. Together. 

May 10,2016 

Chairman David Vitter 

Committee on Small Business & Entrepreneurship 

U.S. Senate 

428A Russell Senate Office Building 

Washington, DC 20510 

Ranking Member Jeanne Shaheen 

Committee on Small Business & Entrepreneurship 

U.S. Senate 

428A Russell Senate Office Building 

Washington, DC 20510 

Dear Chairman Vitter and Ranking Member Shaheen: 

James Ballentine 

Executive Vice President 

Congressional Relations 

and Political Affairs 

202-663-5359 

jballent@aba.com 

The American Bankers Association (ABA) writes to thank you for holding today's hearing on 

the Department of Labor's (DOL) proposed regulation amending the exemptions for executive, 

administrative, professional, outside sales, and computer employees (the "EAP exemptions" or 

"white collar exemptions"). ABA's members, many of whom are community banks, believe that 

employees and employers alike are best served with a system that promotes maximum flexibility 

in structuring employee hours, career advancement opportunities for employees, and clarity for 

employers when classi tying employees. 

On June 30,2015, DOL proposed increasing the overtime threshold to $50,440 per year, a 113 

percent increase that would occur all at once in 2016, and in all areas of the country regardless of 

significant regional economic differences. The Department also proposed automatically 

increasing the salary threshold on an annual basis. While DOL did not offer a specific proposal 

to modifY the standard duties tests, the Department suggested it is considering adding a 

requirement to quantify how much time employees spend performing their primary duties. 

Because, contrary to past practice, DOL did not calculate its proposed salary threshold (or 

attendant annual increases) to address the dramatic differences in the cost of living through the 

country, our members that provide banking services in such areas will be significantly impacted 

by this "one-size-fits-all" rule. In our comment letter to DOL on the proposal, ABA cited a 

number of instances in southern states where, for example, the annual per capita income ranges 

from approximately $13,945 annually to $33,170. While bank employees generally earn good 

salaries based on their local cost of living, these statistics demonstrate the drastic impact of the 

proposed salary thresholds on banks serving these communities. ABA and a number of our 

members participated in Roundtables held by the Small Business Administration Office of 

Advocacy with DOL staff to provide input on the impact of the proposal and the need to consider 

less harmful alternatives. We further met with OMB to again detail our concerns with the 

proposal and the need to lower the proposed salary threshold. 

1120 Connecticut Avenue, NW I Washington, DC 20036 I 1-800-BANKERS I aba.com 
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The Secretary of Labor has responded to questions posed by Members of Congress about these 

concerns by stating that the Department met with these stakeholders and heard their concerns 

prior to issuing the proposed rule; however, the proposed regulation does not reflect that input 

with respect to the salary threshold level and automatic annual updates. Recent press reports that 

the Department is considering lowering the overtime threshold from $50,440 to $47,000 confirm 

that DOL is not taking seriously the public's concerns with its proposal. This is still a 99 percent 

increase in the salary threshold and represents a token reduction that will not alleviate the harm 

this rule will do to community banks and their employees. Based on this information and 

statements made by Department officials, it is clear the Secretary is not willing to reconsider the 

rule in a meaningful way without Congressional action. 

Accordingly, we urge all the members of the Small Business and Entrepreneurship Committee to 

supportS. 2707, the Protecting Workplace Advancement and Opportunity Act. S. 2707 would 

nullify the proposed rule and require the Labor Department to conduct a detailed economic 

analysis before making dramatic changes to federal overtime pay requirements. 

Thank you for convening today's hearing and for the opportunity to submit this letter for the 

record. 

Sincerely, 

James C. Ballentine 

American Bankers Association 

2 
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ft.CUNA 

CmUt Union Natfanal Assot:l1tloa 

May II, 2016 

Jim Nu•• President & CEO 

The Honorable David Vitter 

Committee on Small Business and 

Entrepreneurship 

516 Hart Senate Office Building 

Washington, DC 20510 

l

l:{)l Pe~~~anlloAve., lfN 

South8u11dWlg.Su1Wl:IJJ 

W;nh\ngtorrD.C2\XKl4-2601 

""."'"":202-~..S7-4S 

Fax:202-b38-7734 

Jf!Uule(io.Jn;o.coop 

The Honorable Jeanne Shaheen 

Committee on Small Business and 

Entrepreneurship 

506 Hart Senate Office Building 

Washington, DC 20510 

Dear Chairman Vitter and Ranking Member Shaheen: 

On behalf of the Credit Union National Association (CUNA), I am writing to thank you for 

holding today's hearing, "An Examination of the Administration's Overtime Rule and the 

Rising Cost of Doing Business." CUNA represents America's state and federal credit unions 

and their more than 1 00 mi11ion members. 

CUNA has continually expressed concerns with the Department of Labor's (DOL) proposed 

changes to the Fair Labor Standards Act (FLSA) to increase the threshold to be eligible for 

overtime pay by more than twice the current rate, since it was proposed last summer. The 

proposed changes would disproportionately impact credit unions in rural and underserved 

areas, as well as small credit unions. Additionally, the rule has the potential to negatively 

impact credit union members if credit unions are forced to limit services as a result of changed 

employment situations, or the inability to hire full-time employees. 

The DOL's rule as proposed will magnify the challenges credit unions are already facing as a 

result of an unprecedented amount of regulatory burden. In the United States, there are 

approximately 2, 700 credit unions with five or fewer employers, nearly 3,000 with less than 

$20 million in assets, and approximately 4,000 with less than $50 million in assets. Notably, 35 

percent of all credit unions have no employees makjng salaries over the DOL's proposed 

threshold. In certain areas, and at credit unions with smaller asset sizes, even Chief Executive 

Officers (CEO) can make below the proposed threshold or $50,000. To illustrate the massive 

impact this rule will have on credit union operations it is important to understand that among 

credit unions with less than $10 million in assets, almost all CEOs make less than $50,000 and 

among those with $I 0 to $20 million in assets, roughly half of CEOs make less than $50,000. 

Approximately, 46% of all credit union CEOs work at credit unions with $20 million or less in 

total assets. 

CUNA has supported S. 2707, the "Protecting Workplace Advancement and Opportunity Act," 

which we believe takes proper steps to require additional analysis about the rule's impact on 

businesses and consumers before moving forward with a final rule. This legislation would 

appropriately require the DOL to more fully assess the severe impact of this rule, particularly 

on small credit unions. 
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The Honorable David Vitter 

The Honorable Jeanne Shaheen 

May II, 2016 

Page Two 

We are greatly concerned about the detrimental consequences the DOL's rule could have for 

small credit unions, as well as for larger credit unions, who also are more susceptible to suffer 

as a result of regulatory burdens than the largest financial institutions. Attached please find 

CUNA's comment letter, which further outlines our concerns with the DOL's proposed rule 

concerning overtime pay, as it pertains to credit unions. 

On behalf of America's credit unions, thank you again for holding this hearing. We look 

forward to continuing to work with you as this legislation moves forward, and appreciate your 

efforts to find meaningful regulatory relief for credit unions and their members. 

Sincerely, 

Attachment 

2 
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ft.CUNA 

Credit Union National Association 

Submitted via: Regulations.gov 

September 1, 2015 

Ms. Mary Ziegler 

Director 

PhancXl2-6JS-5777 

Fax20?-63lP/l4 

Division of Regulations, Legislation, and Interpretation, Wage and Hour Division 

U.S. Department of Labor 

Room S-3502 

200 Constitution A venue, NW 

Washington, DC 20210 

RE: Defining and Delimiting the Exemptions for Executive, Administrative, Professional, 

Outside Sales and Computer Employees- RIN 1235-AAll 

Dear Ms. Ziegler: 

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the 

U.S. Department of Labor's (DOL) proposed rule, which amends the Fair Labor Standards Act 

(FLSA) to increase the threshold salary level for "white collar" employees to the 40th percentile 

of earnings for full-time salaried workers to receive overtime pay. While the intent of the 

proposed rule is understandable, CUNA has several concerns about the changes to raise the 

salary threshold from $455 a week ($23,660 a year) to a projected level of $970 a week ($50,440 

a year) in 2016 and to establish a mechanism for automatically updating the minimum salary and 

compensation levels. 

CUNA represents America's credit unions and their more than lOO million members. Credit 

unions are member-owned, not-for-profit financial cooperatives that operate for the purpose of 

promoting thrift, providing credit at competitive rates, and providing other financial services to 

their member-owners. As the only consumer-owned cooperatives in the financial marketplace, 

credit unions have a tradition of protecting the interests of American middle-class families. This 

includes empowering middle-class families with opportunities, increased chances for financial 

success, and the ability to improve their economic well-being. Additionally, as consumer-owned 

cooperatives, credit unions are unique in that personnel and other factors affecting a credit 

union's bottom line can affect credit union members directly as well. This can be particularly 

true in the case of smaller credit unions. 

CUNA supports the DOUs concept that employees should be fairly compensated, and works to 

provide programs and education to help credit unions develop a positive culture that ensures 

opportunities for growth and development among their employees. Despite good intentions, we 

believe the DOL's proposed changes for the exemption threshold for overtime pay are too 

extreme and will ultimately not achieve a better situation for many employees. Increasing the 

threshold for overtime pay by more than twice the previous threshold does not accurately reflect 

the proportional change in salaries since the last rulemaking. Furthermore, in the case of credit 
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unions, the rule does not consider the difficult regulatory environment that has increased costs in 

other areas exponentially over the past few years. Accordingly, it would be extremely difficult 

for credit unions to find the extra resources to come into compliance with this rule, as opposed to 

if the DOL took a more incremental and measured approach to modifying the standards. 

CUNA also has concerns that this overly broad proposed rule, which sweeps in nearly 5 million 

more people and thousands of credit union employees, will have unintended consequences. 

Ultimately, it could negatively affect many credit unions, their members, and their employeeseven those within the salary range the increase aims to help. Particularly, it could cause problems 

for credit unions outside of large metropolitan areas where the average salary is significantly 

different from the average salary at the national level, which the DOL has relied on. 

A Disproportionate Percentage of Credit Union Jobs Fall within the Threshold 

A substantial percentage of credit union employees, specifically employees of smaller credit 

unions and those in rural or underserved areas fall into the salary threshold to be eligible for 

overtime pay under the new proposed rule. Some CUNA member credit unions have commented 

that approximately 80 percent of their employees' salaries will fall within the threshold. 

According to CUNA's Staff Salary Report from 2015 to 2016, in certain areas and at credit 

unions with smaller asset sizes even Chief Executive Officers (CEO) can make below $50,000. 1 

Among credit unions with less than$! 0 million in assets, almost all CEOs make less than 

$50,000. Among those with $10 to $20 million in assets, roughly half ofCEOs make less than 

$50,000. Importantly 46% of all credit union CEOs work at credit unions with $20 million 

or less in total assets. See chart below from the report. 

1 Haller, J., Dey-Marcos, C., Malia, B., CUNA Staff Salary Report 2014-20!5, available at 

http://www .cuna.orgJResearch-And-Strategy/Products/20 15-20 16-CUN A -Staff-Salary-Report-(PDF) (March 5, 

2015). 

2 
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The average/mean base salaries for all of the following positions in CUNA's report fall around 

or below the threshold level: 

Teller Manager/Supervisor; Share Draft Manager; Member Service Representative; 

Member Service Representative; Head Teller; Teller; Share Draft Clerk; EFT/ACH 

Clerk; Executive Secretary! Admin. Asst.; Secretary; Receptionist; New Accounts Clerk; 

General Office Clerk; IRA/Certificate Specialist; Small Credit Union Generalist; Loan 

Officer; Loan Processor; Loan Clerk; Consumer Loan Officer; Consumer Loan 

Processor/Clerk; Mortgage Loan Officer; Mortgage Loan Processor; Collector; 

Collection Clerk; Plastic Card Clerk; ATM Specialist; Technology Specialist; Data Entry 

Specialist; Marketing Specialist; Marketing/Communications Coordinator; Marketing 

Assistant; Business Development Representative; Risk Management Officer/Specialist; 

Non-Management Accountant; Accounting Clerk; Assistant Branch Manager; and Call 

Center Representative. 

Furthermore, approximately 35% of all credit unions in the United States have no employees that 

make over $50,000. It is clear that a sizeable number of credit union employees' salary ranges 

fall right within the new threshold, which will magnify the cost burdens and time constraints 

credit unions are already facing for compliance. Ultimately, this rule could create the dichotomy 

that credit unions whose mission it is to serve the same segment of workers included in this rule, 

could be disproportionally burdened by the rule and unable to maintain the equivalent level of 

service to this same part of the American workforce. 

The Proposed Rule Does Not Account for Credit Unions with Different Asset Sizes and 

Regional Differences 

Credit union employee salaries vary greatly depending on their asset size, the region of the 

country they are located in, the number of employees, the number of services offered, the 

number of members, and the number of branches. Setting one salary threshold for the entire 

country overlooks the fact that the cost of living throughout the country varies, and salaries in 

different regions vary to reflect that. The federal government appears to understand this in many 

other situations, but overlooks this reality in the DOL's proposed rule. For example, the pay table 

for federal employees' salaries vary depending on what state the job is located in and what the 

cost of living is in that area according to the General Schedule pay scale. Yet, the proposed rule 

has a single threshold as a floor for the entire country. 

The average salary in rural and underserved areas is considerably lower than the national 

average. In fact, the Administration has made this observation itself in a report from the Council 

of Economic Advisers entitled, "Strengthening the Rural Economy- The Current State of Rural 

America."2 This report states that, "On average, rural residents have notably lower incomes than 

urban residents ... while the rural poverty rate decreased sizably between 1979 and 1999, the 

2 The Council of Economic Advisers, Strengthening the Rural Economy- The Current State of Rural America, 

available at https://www.whitehouse.gov/administration/eop/cea/factsheets-reports/strengthening-the-ruraleconomy/the-current-state-of-rural-america (20 1 0). 
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average rural county posts poverty rates at least several percentage points above those observed 

in urban counties. Note that the cost of living is higher in urban areas and ideal measures of 

income and poverty would adjust for these differences." 3 As such, even the Administration who 

has supported the DOL's proposed rule must understand that this rule will have a disproportional 

impact on credit unions serving rural areas. 

Notably, other federal agencies have recognized the need to make exceptions during rulemaking 

for financial institutions in rural or underserved areas. For example, as part of section I 022 of the 

Dodd-Frank Wall Street Reform and Consumer Protection Act, when prescribing a rule under the 

federal consumer financial laws, the Consumer Financial Protection Bureau (CFPB) must 

consider the impact of proposed rules on consumers in rural areas. An example of modifications 

made for small creditors in rural and underserved areas can be found in a recent proposal from 

the CFPB concerning mortgage-lending rules released in January 2015.4 

There is also precedent for exempting smaller businesses from federal rules that will have a 

disproportionate impact on them. For example, the mandatory leave provisions of the Family and 

Medical Leave Act of 1993 do not apply to employers with under 50 employees. As of March 

2015, there are approximately 2,700 credit unions with five or fewer employers, nearly 3,000 

with less than $20 million in assets, and approximately 4,000 with less than $50 million in assets. 

Another law, the Regulatory Flexibility Act of 1980 (RF A) requires federal agencies to evaluate 

the impacts of their proposed regulations on small entities, analyze effective alternatives that 

minimize impacts on small businesses, and make these assessments available for public 

comment. The Small Business Regulatory Enforcement Fairness Act (SBREF A) of 1996, which 

amended the RF A, requires the CFPB to convene a Small Business Review panel if it engages in 

a rulemaking that will affect a substantial number of small entities. The CFPB has held several 

SBREFA panels that included participation from credit unions with under $550 million in assets. 

During these panels, credit unions have made persuasive arguments about why sweeping new 

federal rules are often inappropriate for smaller credit unions. CUNA encourages the DOL to 

engage in a similar analysis of the impact their rule may have on credit unions with under $550 

million in assets. 

It is clear that credit unions and other businesses in non-metropolitan areas would be unfairly 

burdened by the proposed rule, and would have to pay overtime to a much larger percentage, or 

maybe even all, of their workforce. Similarly, smaller credit unions who may have fewer 

members and less revenue may not be in the same position to pay the same salaries as larger 

financial institutions. CUNA asks that the DOL consider these distinctions and reevaluate its 

proposed salary threshold for overtime, which arguably is not appropriate for credit union 

employees in general, but may be particularly inappropriate for small credit unions and those in 

rural and underserved areas. 

3 Id 

4 The Consumer Financial Protection Bureau, "CFPB Issues Proposal To Facilitate Access To Credit In Rural And 

Underserved Areas," available at http://www.consumerfinance.gov/newsroom/cfpb-issues-proposal-to-facilitateaccess-to-credit-in-rural-and-underserved-areas/ (January 29, 20 15). 

4 
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Credit Union Employees Could Be Negatively Impacted by Unintended Consequences of 

the Rule 

If a credit union cannot afford to increase salaries, some employees even at the management 

level might have to change their employment status from exempt to non-exempt. Since those in 

management often work over 40 hours a week this could make overtime costs increase 

exponentially. One credit union commented to CUNA that it might have to raise the salaries of 

some employees, even some at the management level, by as much as $10,000 in order for the 

employees to remain exempt. Employees particularly at the management level could see a 

change in status to non-exempt as a demotion, and this could create bad morale. Additionally, if 

for example, one level of employees received a $10,000 increase in salary to remain exempt, and 

the level of employees right above them received no increase in compensation because they are 

already at the exempt level, this could allow for an uneven playing field by creating similar 

salaries for jobs with different levels of responsibility and difficulty. 

There are also several other likely results of this proposed rule, which could negatively affect 

credit union employees that may not be as readily apparent. If employees change to a nonexempt status, scheduling for time off and other purposes could be less flexible. Employees may 

have to make specific arrangements for leave, or potentially take unpaid leave, as opposed to a 

more flexible current situation for time off as described by some credit unions. Employers may 

also be forced to create strict rules for overtime pay, and lower-income employees who currently 

rely on it may not have as many opportunities to receive it. 

Employee benefits may also be subject to negative change if it is necessary to realign costs. If 

credit unions are forced to increase salaries or pay significantly more in overtime hours, this 

could force them to reconsider some of the benefits or "perks" that they currently offer. 

Moreover, some beneficial opportunities are only available during off work hours, which may 

require overtime under the new rules. For example, networking events, conferences, and other 

opportunities for employees to meet people in their industry or managers might fall outside of 

normal work hours. If employers have to pay employees overtime for these work events, they 

may be forced to not be as inclusive in these activities. Employers who have unexpected 

expenses as a result of this rule, and who have to pay employees more, may also be unable to 

hire new employees, or they may convert full-time positions to part-time. 

Credit unions are currently facing substantial regulatory burdens from several other agencies as 

well, and their time and resources dedicated to complying with new rules and regulations are not 

unlimited. Squeezing resources from entities that simply have nothing left to squeeze is not the 

answer to creating growth and opportunity for employees. Instead, such policies will likely cause 

credit unions and other businesses to make cuts in other equally important areas to find the 

resources to pay overtime expenses. 

Credit Union Members May Also Be Negatively Impacted 

Changes to the number of hours that employees work or the size of a credit union staff would 

ultimately affect credit union members as well. It is not always easy for credit union members to 

visit a branch during regular business hours when they are at their own jobs. Limiting credit 
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union employees to only working 40 hours a week may make it more difficult to keep branches 

open during convenient times for working families. If credit unions have to close on weekends or 

have shorter hours, this could affect the ability of members to receive service. 

Credit unions that have to limit work hours for their employees may offer fewer products and 

services, and focus only on the basic needs of members. This may impede efforts to expand 

credit union products or service offerings, and inhibit innovation. Credit unions may be stuck 

navigating how to operate in the same way at a higher cost, without adding any additional value 

to members. 

The Duties Test Should Not Be Changed Without Providing Additional Details for Public 

Comment 

In the proposed rule, the DOL states it is considering whether revisions to the duties tests are 

necessary in order to ensure these tests fully reflect the purpose of the exemption. However, the 

proposed rule includes no information about what changes the DOL is considering. In the 

absence of providing specific information for the public to consider and comment on, the DOL 

should not make any unilateral changes to the duties test. 

Automatically Updating the Salary Level Is Problematic 

CUNA opposes automatically updating the salary level at the 40th, or any, fixed percentile 

range. If the proposed rule is finalized in its current form, there is a concern that a number of 

employees in the $20,000 to $35,000 salary range could unfortunately be moved to part-time 

status at businesses throughout the country. As such, the average yearly salary could drastically 

increase, at least on paper, and the 40th percentile, not including all of the part-time workers, 

may end up much higher than the $50,000 range. As highlighted in our comments, there are 

already many concerns with this proposed range and an artificially inflated increased threshold 

would only compound the challenges CUNA has outlined. 

In general, we believe the changing economy should be revaluated each year in a more analytical 

way than merely looking at a fixed percentile of the entire country to determine a threshold. An 

arbitrary threshold could be extremely problematic if it does not account for all of the other 

factors that contribute to changes to the economy and workforce each year. Furthermore, as 

previously noted, we believe any threshold must include a further analysis that examines the 

impact on rural and underserved areas, and small businesses. 

Finally, we are concerned that employers will have inadequate notice about what the new 

threshold is each year if the salary level is automatically updated. The proposal states that the 

new threshold would be published annually giving the public 60 days-notice. This short time 

frame would be very difficult for credit unions to comply with, and would likely not provide 

enough notice to make appropriate changes. 
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Conclusion 

CUNA appreciates the DOL's attempt to take steps to improve the livelihood of American 

middle-class families, a cause that credit unions have long supported. However, we believe the 

DOL's proposed rule overlooks a number of important factors such as a disproportionate impact 

on credit unions, particularly in non-metropolitan areas, and small credit unions. Furthennore, 

the DOL's proposal does not account for unintended negative consequences on employees both 

within and outside the salary range to receive overtime pay. In addition, it has the potential to 

negatively impact credit union members. 

As a result of these insufficiencies, we believe it is necessary for the DOL to engage in further 

analysis about the likely impacts of its proposed rule, and to more narrowly tailor its proposal for 

overtime pay to include a more reasonable percentage of the workforce that does not include 

entire industries or entire regions of the country. 

Thank you for the opportunity to comment on this proposed rule. If you have any questions 

concerning our letter, please feel free to contact me. 

Sincerely, 

Leah Dempsey 

Senior Director of Advocacy & Counsel 

Ldempsey@cuna.coop 

202-508-3636 

7 
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May 11,2016 

Chairman David Vitter 

Committee on Small Business & 

Entrepreneurship 

U.S. Senate 

428A Russell Senate Office Building 

Washington, DC 20510 

Ranking Member Jeanne Shaheen 

Committee on Small Business & 

Entrepreneurship 

U.S. Senate 

428A Russell Senate Office Building 

Washington, DC 20510 

Dear Chairman Vitter and Ranking Member Shaheen: 

On behalf of the Partnership to Protect Workplace Opportunity (the Partnership), we thank you 

for holding today's hearing on the Department of Labor's proposed regulation amending the 

exemptions for executive, administrative, professional, outside sales, and computer employees 

(the "EAP exemptions" or "white collar exemptions"). The Partnership consists of a diverse 

group of associations and companies, representing employers with millions of employees across 

the country in almost every industry (see http://protectingopportunity.org/about-ppwo/). The 

Partnership's members believe that employees and employers alike are best served with a system 

that promotes maximum flexibility in structuring employee hours, career advancement 

opportunities for employees, and clarity for employers when classifying employees. 

On June 30,2015, DOL proposed increasing the overtime threshold to $50,440 per year, a 113% 

increase that would occur all at once in 2016, and in all areas of the country regardless of 

significant regional economic differences. The Department also proposed automatically 

increasing the salary threshold on an annual basis. While DOL did not offer a specific proposal 

to modify the standard duties tests, the Department suggested it is considering adding an 

unworkable requirement to quantify how much time employees spend performing their primary 

duties. 

While an increase to the salary threshold is due, DOL's proposed rule has been met with 

widespread opposition from tens of thousands small and large businesses, nonprofits, local 

governments, academic institutions, and President Obama's own Small Business Administration 

Office of Advocacy- all of which have asked the Labor Department to examine more closely the 

impact of the drastic and immediate increase and consider less harmful alternatives. Comments 

and letters have been sent from organizations around the county asking the Department, the 

Administration and Members of Congress to rethink this rule (we provide samples in the 

attached document, which includes comments from those in committee member's states). 
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The Secretary of Labor has responded to questions posed by Members of Congress about these 

concerns by stating that the Department met with these stakeholders and heard their input prior 

to issuing the proposed rule; however, the proposed regulation clearly does not reflect that input 

with respect to the salary threshold or automatic updates. 

Recent press reports that the Department is considering lowering the overtime threshold from 

$50,440 to $47,000 confirm that the DOL is not taking seriously the public's concerns with its 

proposal. This is still a 99% increase in the salary threshold and represents a token reduction that 

will not alleviate the harm this rule will do to nonprofits, colleges, and small businesses and their 

employees. Moreover, the fact that this reported reduction was leaked after OMB held more than 

40 listening sessions with concerned stakeholders requesting that the rule be comprehensively 

reevaluated makes clear that the Secretary is not willing to reconsider the rule in a meaningful 

way without Congressional action. 

Accordingly, we urge all the members of the Small Business and Entrepreneurship Committee to 

cosponsorS. 2707, the Protecting Workplace Advancement and Opportunity Act, which would 

require the Labor Department to conduct a detailed economic analysis before making dramatic 

changes to federal overtime pay requirements. In essence, the bill requires the Department to 

move forward in a responsible rather than reckless manner. The legislation is supported by 340 

national, regional, state, and local organizations representing nonprofits, institutions of higher 

education, schools, cities, counties and small and large businesses across the country (please see 

attached letter of support). 

Thank you for convening today's hearing arid for the opportunity to submit this letter for the 

record. 

Sincerely, 

The Partnership to Protect Workplace Opportunity 

Protectingopportunity.org 
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April IS, 2016 

Dear Senator: 

On behalf of the Partnership to Protect Workplace Opportunity (the Partnership) and the undersigned 

340 local and national organizations representing small and large businesses, nonprofits, institutions of 

higher education, schools, cities and counties, we write to ask that you cosponsorS. 2707, the 

Protecting Workplace Advancement and Opportunity Act. This important and reasonable legislation 

would require the U.S. Department of Labor to perform a detailed impact analysis prior to 

implementing changes to the exemptions for executive, administrative, and professional employees 

(the "white collar exemptions") under the Fair Labor Standard Act's overtime pay requirements. 

The Partnership consists of a diverse group of associations, representing employers with millions of 

employees across the country in almost every industry (see http://protectingopportunity.org). The 

Partnership's members believe that employees and employers alike are best served with a system that 

promotes maximum flexibility in structuring employee hours, career advancement opportunities for 

employees, and clarity for employers when classifying employees. 

Currently, under the Fair Labor Standards Act (FLSA) regulations, a person must.satisJY three criteria 

to qualify as exempt from federal overtime pay requirements: first, they must be paid on a salaried 

basis; second, that salary must be more than $455/week ($23,660 annually); and third, their "primary 

duties" must be consistent with managerial, professional or administrative positions as defined by the 

Department of Labor (DOL). 

On June 30, 2015, DOL proposed increasing the salary threshold to $50,440 per year, a 113% increase 

that would occur all at once in 2016, and in all areas of the country regardless of significant regional 

economic differences. The Department also proposed automatically increasing the salary threshold on 

an annual basis. While DOL did not offer a specific proposal to modify the standard duties tests, the 

Department suggested it is considering adding an unworkable requirement to quantify how much time 

employees spend performing their primary duties. 

While an increase to the salary threshold is due, DOL's proposed rule has been met with widespread 

opposition from small and large businesses, nonprofits, local governments, academic institutions, and 

President Obama's own Small Business Administration Office of Advocacy- all of which have asked 

the Labor Department to examine more closely the impact of the drastic and immediate increase and 

consider less harmful alternatives. The Secretary of Labor has responded to questions posed by 

Members of Congress about these coneerns by stating that the Department met with these stakeholders 

and heard their concerns prior to issuing the rule; however, the proposed salary threshold clearly does 

not reflect that input. Based on these statements and others made by Department officials, it is clear the 

Secretary is not willing to reconsider the rule in a meaningful way without Congressional action. 

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S. 2707, the Protecting Workplace Advancement and Opportunity Act, would block the current 

proposed regulation from taking effect and require the Department of Labor to perform a deeper 

analysis on the impact of the proposed changes on small businesses, nonprofits, regional economies, 

local governments, Medicare and Medicaid dependent health care providers, and academic institutions, 

as well as employee flexibility and career advancement before proceeding with a new rule. 

The Protecting Workplace Advancement and Opportunity Act is consistent with comments submitted 

by the Small Business Administration's Office of Advocacy, which noted that DOL's economic 

analysis severely underestimated the impact the proposed rule would have on small businesses, 

nonprofits, and small governmental jurisdictions. The comments also criticized the Department's 

analysis for not considering the impact the proposal would have on various regions of the country with 

different costs of living. 

The bill does not prevent an increase in the salary threshold; it merely requires the Department of 

Labor to more closely examine the impact of possible changes before proceeding with a final rule. 

Accordingly, we urge you to cosponsor S. 2707, the Protecting Workplace Advancement and 

Opportunity Act. 

Sincerely, 

The Partnership to Protect Workplace Opportunity and the following organizations: 

National Organizations 

ACPA-College Student Educators International 

Aeronautical Repair Station Association 

Agricultural Retailers Association 

American Apparel & Footwear Association 

American Association of Advertising Agencies (4A's) 

American Association of Collegiate Registrars and Admissions Officers 

American Bakers Association 

American Bankers Association 

American Car Rental Association 

American Concrete Pressure Pipe Association 

American Council of Engineering Companies 

American Frozen Food Institute 

American Hotel & Lodging Association 

American Institute of CPAs 

American Insurance Association 

American Moving & Storage Association 

American Rental Association 

American Society of Association Executives 

American Society of Travel Agents 

American Staffing Association 

American Subcontractors Association, Inc. 

American Supply Association 

American Veterinary Distributors Association (A VDA) 

AmericanHort 

Argentum (formerly the Assisted Living Federation of America) 

Asian American Hotel Owners Association 

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Associated Builders and Contractors 

Associated Equipment Distributors 

Association for Student Conduct Administration 

Associated General Contractors 

Association of American Veterinary Medical Colleges 

Association of College and University Housing Officers-International 

Association of School Business Officials International (ASBO) 

Auto Care Association 

Blue Roof Franchisee Association 

Building Service Contractors Association International (BSCAI) 

CAW A- Representing the Automotive Parts Industry 

Coalition of Franchisee Associations 

College and University Professional Association for Human Resources 

Consumer Technologies Association 

Convenience Distribution Association 

Door Security and Safety Professionals 

Electronic Transactions Association 

Equipment Dealers Association (formerly the North American Equipment Dealers Association) 

Financial Services Institute 

Food Marketing Institute 

Franchise Business Services 

Gases and Welding Distributors Association 

Global Cold Chain Alliance 

Heating, Air-conditioning & Refrigeration Distributors International (HARD!) 

HR Policy Association 

INDA, Association of the Nonwoven Fabrics Industry 

Independent Electrical Contractors 

Independent Insurance Agents & Brokers of America 

Independent Office Products and Furniture Dealers Association 

Information Technology Alliance for Public Sector 

International Association of Amusement Parks & Attractions 

International Association of Refrigerated Warehouses 

International Bottled Water Association 

International Dairy Foods Association 

International Foodservice Distributors Association 

International Franchise Association 

International Public Management Association for Human Resources 

International Warehouse Logistics Association 

!PC Association Connecting Electronics Industries 

ISSA, the Worldwide Cleaning Industry Association 

Metals Service Center Institute 

Motor & Equipment Manufacturers Association 

NAHAD- The Association for Hose & Accessories Distribution 

NASP A- Student Affairs Administrators in Higher Education 

National Apartment Association 

National Association of Chemical Distributors 

National Association of College and University Business Officers 

National Association of College Stores 

National Association of Convenience Stores 

National Association of Development Organizations 

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National Association of Electrical Distributors 

National Association of Home Builders 

National Association of Landscape Professionals 

National Association of Manufacturers 

National Association of Mutual Insurance Companies 

National Association of Professional Insurance Agents 

National Association of Sporting Goods Wholesalers 

National Association of Wholesaler-Distributors 

National Beer Wholesalers Association 

National Christmas Tree Association 

National Club Association 

National Council of Chain Restaurants 

National Council of Farmer Cooperatives 

National Fastener Distributors Association 

National Federation of Independent Business 

National Franchisee Association 

National Grocers Association 

National Insulation Association 

National Lumber and Building Material Dealers Association 

National Marine Distributors Association 

National Multifamily Housing Council 

National Newspaper Association 

National Office Products Alliance 

National Pest Management Association 

National Public Employer Labor Relations Association 

National Ready Mixed Concrete Association 

National Restaurant Association 

National Retail Federation 

National Roofing Contractors Association 

National RV Dealers Association 

National School Transportation Association 

National Small Business Association 

National Tooling and Machining Association 

NA TSO, Representing America's Travel Plazas and Truckstops 

Newspaper Association of America 

NIRSA: Leaders in Collegiate Recreation 

North American Die Casting Association 

NPES The Association for Suppliers of Printing, Publishing and Converting Technologies 

Office Furniture Dealers Alliance 

Outdoor Power Equipment and Engine Service Association 

Pet Industry Distributors Association 

Precision Machined Products Association 

Precision Metalforming Association 

Promotional Products Association International 

Retail Industry Leaders Association 

Secondary Materials and Recycled Textiles Association (SMART) 

Selected Independent Funeral Homes 

Service Station Dealers of America and Allied Trades 

Small Business & Entrepreneurship Council 

SNAC International 

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Society for Human Resource Management 

Society of American Florists 

Society of Independent Gasoline Marketers of America 

SPI: The Plastics Industry Trade Association 

Textile Care Allied Trades Association 

Textile Rental Services Association 

The Latino Coalition 

Tire Industry Association 

Truck Renting and Leasing Association 

U.S. Chamber of Commerce 

Water & Sewer Distributors of America 

Wine & Spirits Wholesalers of America 

WorldatWork 

Regional. State, and Local Organizations 

Alabama Chapter (CUPA-HR) 

Alabama Restaurant & Hospitality Alliance 

Alabama SHRM State Council 

Alaska Hotel & Lodging Association 

Alaska SHRM State Council 

Alliance of Automotive Service Providers of Pennsylvania 

American Society of Employers 

Arizona Lodging & Tourism Association 

Arizona SHRM State Council 

Arkansas Hospitality Association 

Arkansas SHRM State Council 

Associated Builders & Contractors, Rocky Mountain Chapter 

Associated Builders and Contractors - Virginia Chapter 

Associated Builders and Contractors Heart of America Chapter 

Associated Oregon Industries 

Automotive Aftermarket Association of the Carolinas and Tennessee, Inc 

Automotive Aftermarket Association Southeast 

Automotive Parts & Services Association-Texas 

Building Industry Association of Washington 

California Hotel & Lodging Association 

California Retailers Association 

California State Council of SHRM 

California, Nevada, Arizona Automotive Wholesalers Association 

Capital Associated Industries (NC) 

Carolinas Food Industry Council 

Chesapeake Automotive Business Association 

Colorado Hotel & Lodging Association 

Colorado Retail Council 

Colorado SHRM State Council 

Connecticut Lodging Association 

Connecticut Retail Merchants Association 

Connecticut SHRM State Council 

Delaware SHRM State Council, Inc. 

Employers Coalition of North Carolina 

Far West Equipment Dealers Association 

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Florida Building Material Association 

Florida Chapter (CUPA-HR) 

Florida Restaurant & Lodging Association 

Florida Retail Federation 

Garden State Council SHRM, Inc. 

Georgia Hotel & Lodging Association 

Georgia Retail Association 

Georgia SHRM State Council 

Hawaii Lodging & Tourism Association 

Hotel Association ofNew York City, Inc. 

Hotel Association of Washington DC 

HR Florida SHRM State Council, Inc. 

HR State Council of New Hampshire 

Idaho Retailers Association, Inc. 

Idaho SHRM State Council 

Illinois Chapter (CUPA-HR) 

Illinois Hotel & Lodging Association 

Illinois Retail Merchants Association 

Illinois SHRM State Council 

Indiana Restaurant & Lodging Association 

Indiana Retail Council, Inc. 

Indiana SHRM State Council 

Iowa Retail Federation 

Iowa SHRM State Council 

Kansas Chapter (CUPA-HR) 

Kansas State Council of SHRM, Inc. 

Kentucky Chapter (CUPA-HR) 

Kentucky Retail Federation, Inc. 

Kentucky SHRM State Council 

Kentucky-Indiana Automotive Wholesalers Association 

Louisiana Hotel & Lodging Association 

Louisiana Retailers Association 

Louisiana SHRM State Council 

Maine Innkeepers Association 

Maine SHRM State Council 

Manufacturer & Business Association 

Maryland Association of CPAs 

Maryland Chapter (CUPA-HR) 

Maryland Hotel & Lodging Association 

Maryland Retailers Association 

Maryland SHRM State Council 

Massachusetts Lodging Association 

Massachusetts State Council of SHRM 

Michigan Chapter (CUPA-HR) 

Michigan Lodging and Tourism Association 

Michigan Retailers Association 

Michigan SHRM State Council 

Midwest Automotive Parts & Service Association 

Minnesota Chapter (CUPA-HR) 

Minnesota Grocers Association 

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Minnesota Lodging Association 

Minnesota Retailers Association 

Minnesota SHRM State Council 

Mississippi State Council ofSHRM 

Missouri Retailers Association 

Missouri State Council of SHRM, Inc. 

Missouri Tire Industry Association 

Montana Chamber of Commerce 

Montana Equipment Dealers Association 

Montana Lodging & Hospitality Association 

Montana Restaurant Association 

Montana Retail Association 

Montana SHRM State Council 

Montana Tire Dealers Association 

Nebraska Chamber of Commerce & Industry 

Nebraska Hotel & Motel Association 

Nebraska Retail Federation 

Nebraska SHRM State Council 

Nevada Chapter of(CUPA-HR) 

Nevada Hotel & Lodging Association 

Nevada SHRM State Council 

New England Tire & Service Association 

New Hampshire Lodging & Restaurant Association 

New Hampshire Retail Association 

New Jersey Chapter (CUPA-HR) 

New Jersey Gasoline, C-Store, Automotive Association 

New Jersey Hotel & Lodging Association 

New Jersey Retail Merchants Association 

New Mexico Retail Association 

New Mexico SHRM State Council 

New York Metro Chapter (CUPA-HR) 

New York State Association of Service Stations and Repair Shops, Inc. 

New York State Hospitality & Tourism Association 

New York State SHRM, Inc. 

North Carolina Chapter (CUPA-HR) 

North Carolina Restaurant & Lodging Association 

North Carolina Retail Merchants Association 

North Carolina SHRM State Council 

North Dakota SHRM State Council 

Northeastern Retail Lumber Association 

Ohio Chapter (CUPA-HR) 

Ohio Council of Retail Merchants 

Ohio Equipment Distributors Association 

Ohio Hotel & Lodging Association 

Ohio SHRM State Council 

Oklahoma Hotel & Lodging Association 

Oklahoma Retail Merchants Association 

Oklahoma SHRM State Council 

Oregon Restaurant & Lodging Association 

Oregon Retail Council 

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Oregon SHRM State Council 

Pelican Chapter, Associated Builders and Contractors, Inc. 

Pennsylvania Association of Automotive Trades 

Pennsylvania Food Merchants Association 

Pennsylvania Institute of Certified Public Accountants 

Pennsylvania Restaurant & Lodging Association 

Pennsylvania Retailers Association 

Pennsylvania SHRM State Council 

Public Employer Labor Relations Association of California 

Public Employer Labor Relations Association of Maryland 

Public Employer Labor Relations Association of Ohio 

Retail Association of Maine 

Retail Association of Nevada 

Retail Council of New York State 

Retailers Association of Massachusetts 

Rhode Island Hospitality Association 

Rhode Island Retail Federation 

Rhode Island SHRM State Chapter 

SHRM Hawaii State Council 

SHRM Pacific Council 

Rocky Mountain Chapter (CUPA-HR) 

South Carolina Chapter (CUPA-HR) 

South Carolina Restaurant & Lodging Association 

South Carolina Retail Association c/o NCRMA 

South Carolina SHRM State Council 

South Dakota CPA Society 

South Dakota Retailers Association 

South Dakota SHRM State Council 

Southwest Car Wash Association 

Southwestern Pennsylvania Chapter (CUPA-HR) 

Tennessee Hospitality & Tourism Association 

Tennessee SHRM State Council 

Texas Hotel & Lodging Association 

Texas Independent Automotive Association 

Texas Retailers Association 

Texas SHRM State Council 

Texas Tire Dealers Association 

United Equipment Dealers Association 

Utah Chapter (CUPA-HR) 

Utah Food Industry Association 

Utah Hotel & Lodging Association 

Utah Human Resource State Council 

Utah Retail Merchants Association 

Vermont Chamber of Commerce 

Vermont Retail & Grocers Association 

Vermont SHRM State Council 

Virginia Hospitality & Travel Association 

Virginia Retail Merchants Association 

Virginia SHRM State Council 

Washington Lodging Association 

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Washington Maryland Delaware Service Station and Automotive Repair Association 

Washington Retail Association 

Washington State Chapter (CUPA-HR) 

Washington State Human Resources Council 

West Virginia Chapter (CUPA-HR) 

West Virginia Hospitality & Travel Association 

West Virginia Retailers Association 

West Virginia SHRM State Council 

Western Equipment Dealers Association 

Western Suppliers Association 

Wholesalers Association of the North East, Inc. 

Wisconsin Hotel & Lodging Association 

Wisconsin Manufacturers and Commerce 

Wisconsin SHRM State Council 

Wyoming Lodging & Restaurant Association 

Wyoming SHRM State Council 

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Sampling of Higher Education fmoacts from the Register and Media Stories: 

Florida: 

Iowa: 

o Comments of the State University System of Florida "At this point, a review of the raw 

data costs alone for all twelve (12) state of Florida universities' employees currently 

meeting the exempt tests would be in excess of $62,000,000.00 of annual recurring 

salary costs if salaries were to be increased to the new proposed minimum salary 

threshold of $50,440 in 2016." http://www.regulations.gov/#!documentDetaii·D=WHD2015-0001-2242 

o Comments of the University of Iowa "The over 2,700 individuals we employ and whose 

status would immediately change from exempt salaried to non-exempt hourly" and 11 the 

alternative of paying overtime would generally be cost prohibitive; the annual cost of one 

hour of overtime per week for each of our 2,700 impacted employees would increase 

University payroll costs by over $4 million." 

http://www.regulations.gov/#!documentDetaii:D=WHD-2015-0001-2316 

o Comments of the Iowa Community College Trustees "The NPRM mandate impacts Iowa 

Community Colleges by $12,648,786 in the first quarter of 2016 alone in salary and 

benefit expense." http://www. regulations.gov /# !docu me ntDeta ii;D=WH D-2015-0001-

2398 

Kentucky: 

o March 30, 20161nside Higher Ed OpEd "As president of Thomas More College, a small 

faith-based college in Kentucky, I worry that the changes would take a grave toll on 

institutions like mine that are enrollment and tuition driven ... [W]e project our budget 

would increase by $1.4 million each year. .. that is more than a 12 percent annual 

increase ... An increase of that magnitude could potentially have catastrophic effects on 

us and other small institutions nationwide." https://www.insidehighered.com/views/ 

2016/03/29/proposed~new-overtime-pay-regulations-could-negative/y-impact-collegesand-their 

o Kentucky Community and Technical College System " ... we have estimated we could 

potentially be subject to additianal wages of at least $2.5 million for a fiscal year, and it 

could impact approximately 863 af our administrative and staff employees ... more than 

doubling the threshold will significantly impact employers and employees and requires a 

more thorough analysis for the economic consequences ... The wages and cost of living in 

small towns in Kentucky is astronomically different than San Francisco and New York City 
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Maryland: 

PARTNERSHIP TO PROTECT 

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and this should be considered ... There is also a perception of demotion for employees 

who have a change in status." 

o University of Maryland Extension "These changes proposed by the Wage and Hour 

Division, DOL, would substantially impact the fiscal operations of Extension and our 

College of Agriculture and Natural Resources (AGNR). These rule changes would cost 

AGNR approximately $117,446 in base funding and effect 22 persons within our 

institution. Because ofthis projected increase in base funding our College may not be 

able to retain our current number of FTEs or employed exempt positions, thus potentially 

impacting the personal livelihoods of our employees." 

https://www. regulations.gov/#!documentDetail: D~WH D-2015-0001-5668 

o February 11, 2016 Letter by Public Sector Employers to Congress: "The University 

System of Maryland's preliminary estimate is an increase in costs between $16 million 

and $40 million in just the first year." 

Michigan: 

o March 29, 2016 Hearing before House Workforce Protections Subcommittee: 11For the 

University of Michigan, the largest higher education employer in the state, the changes 

would affect more than 3,100 people in roles critical to our missions, including research 

fellows and lab staff, student housing officers, admissions recruiters, academic advisors, 

financial aid administrators, social workers, clinical dietitians, 2 clinical research 

coordinators and fund raisers. The projected cost at U-M to implement the change is as 

high as $34 million; early statewide estimates from The Michigan Association of State 

Universities peg the cost at more than $60 million for 11 of the 15 total member 

institutions reporting." http://edworkforce.house.gov/uploadedfiles/thomas.pdf 

Nebraska: 

o Nebraska State College System "While I support the concept of providing appropriate 

salary levels and classifications for our employees, the proposed salary threshold 

increase would alter the status of a great number of our employees who are currently 

exempt. As three small colleges in rural Nebraska, the State Colleges have a significant 

economic impact in the regions that we serve, primarily in salaries and the purchase of 

goods from vendors in our service areas. The proposed rules as written would drastically 

change how we conduct business and provide service to our students and our 

communities. Having such a drastic one time increase puts the State Colleges at risk of 
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having to reduce the number of employees to offset the increased financial costs of 

overtime pay." https://www.regulations.gov/#!documentDetaii:D=WHD-2015-0001-2111 

South Carolina: 

o South Carolina Independent Colleges and Universities "The SCICU membership includes 

5 Historically Black Colleges and Universities (HBCU), 2 Women's colleges, and a 2-year 

college. Many of our members are church-related and faith-based ... employ 7,000 

throughout the State ... would be significantly affected by the changes in the NPRM. Our 

members agree ... the proposed minimum salary threshold, however, is simply too high." 

https:ljwww.regulations.gov/#!documentDetaii:D=WHD-2015-0001-5569 

o ECOP, South Carolina State University "The mission of Cooperative Extension is to 

extend the research knowledge of the university to people where they live and work, 

encouraging changed behavior, and increasing quality of life, business effectiveness, and 

community vitality ... Extension programs have estimated financial effects of this ruling 

anywhere from $400,000 annually at a smaller university to $3.5 million in a larger one." 

https:ljwww.regulations.gov/#!documentDetaii;D=WHD-2015-0001-3880 
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Sampling o(Non~profit comments from the Federal Register: 

Notional: 

o Operation Smile "The leadership team at Operation Smile is opposed to the proposed 

changes to the salary threshold tests, specifically the drastic increase to a salary level of 

$50,400 ... Since its founding in 1982, Operation Smile has provided more than 220,000 free 

surgical procedures for children and young adults born with cleft lip, cleft palate and other 

facial deformities ... Yet still, this proposed update will increase our payroll cost by nearly $1 

million annually affecting over 50 percent of our workforce. Considering that a cleft lip 

surgery performed somewhere in the world costs an average of $240, this would mean 

4,166 fewer surgeries provided by Operation Smile globally each year ... Our focus needs to 

be on managing programs not overtime." 

https://www.regulations.gov/#!documentDetaii:D-WHD-2015-0001-5060 

o Habitat for Humanity "Habitat for Humanity (Habitat) and other charitable organizations 

will be disproportionately impacted by the proposed rule and unable to comply without 

reducing access to products and services ... it is estimated that 65 percent of Habitat 

affiliates employing paid staff will be impacted by the proposal ... The nearly $27,000 

increase in the minimum salary to qualify for the overtime exemption, far example, 

represents one-third to one-quarter of the cost of building o typical Habitat home. For a 

smaller, rural affiliate ... it may be impossible to absorb the increased cost... Such an affiliate 

may have no choice but to cease operations, even if it is the only affordable housing 

provider in the community it serves." 

https://www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-5647 

o The Salvation Army National Headquarters "We respectfully urge the Wage and Hour 

Division to reconsider the substantial increase in the minimum salary threshold for 

"exempt" employees that is contemplated by the Proposed Regulations ... the proposed 

increase in the minimum salary for nexemptm employees would substantially increase the 

cost of delivering our services, most of which are provided free of charge. Based on 

information that has been collected to date, it appears that 50% or more of our employees 

nationwide who are currently classified as 11 exempt" would become '

1

non-exempt 11 ••• The 

significance of the effect of this change to our organization cannot be over-stated ... We 

anticipate that staff cuts would therefore become necessary and that we would be required 

to reduce the religious and charitable programming that we provide nationally." 

https://www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-2789 

o National Council for Behavioral Health "The National Council is a non-profit association 

representing 2,350 community-based mental health and addiction treatment providers ... we 

strongly regret that we are unable to support the proposed rule in its current form. As 

written, the rule would have a potentially devastating effect on health care organizations 
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serving low-income individuals with serious and persistent mental illnesses and addictions, 

resulting in the need for service cutbacks and program closures ... The untenable financial 

pressure resulting from the proposed changes would force provider organizations into 

disastrous service reductions and program closures." 

https:/lwww.regulations.gov/#!documentDetaii:D=WHD-2015-0001-2514 

o National Head Start Association (NHSA) "NHSA is the national voice of the more than a 

million children in Head Start and Early Head Start programs in the United States ... Our 

concerns on the regulatory change are driven entirely by the potential negative impacts on 

Head Start and Early Head Start agencies ... In addition to the potential direct negative 

impacts on staff, we remain concerned that the proposed NPRM will negatively impact the 

quality of services we provide to children and families as well... Without additional funding, 

these programs may be forced to reduce the working hours of essential staff, causing a 

reduction in the hours and days of operation of some programs. This development would 

undermine and diminish the ability for programs to meet the needs of the children and 

families they are trying to serve as well as pose a significant adverse impact on working 

parents, their employers, and the nation's broader economy." 

https:/lwww .regu latio ns.gov /# !docu mentDetail; D=WH D-2015-0001-5194 

o Catholic Charities USA "We feel compelled to share what we believe could be substantially 

negative, and in many cases disproportionate impacts on our agencies as non profits. Our 

overriding concern is that these negative operational impacts will ultimately result in a 

decline in services, or quality of services, to the most vulnerable members of society who 

our agencies serve ... Specifically, agencies shared that they may need to reduce weekend 

and evening service hours, close certain program sites, cut back on community outreach 

activities, or limit staff from 11going the extra mile" ... The greatest impact would be felt by 

emergency services programs ... These include drop~in centers, domestic violence shelters, 

crisis pregnancy services, and refugee resettlement programs ... the regulations as proposed 

could place significant burdens on our agencies and ultimately negatively impact their ability 

to serve in their communities, resulting in a net negative, rather than positive, impact for 

the most vulnerable in our communities." 

https://www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-5320 

o Special Olympics "As the rulemaking stands, it could substantially impair Special Olympics 

leading role in providing much~needed services to those with intellectual and 

developmental disabilities. Higher thresholds of overtime compensation for our staff, if 

realized, would have a negative impact on our ability to advance our mission, serve people 

with intellectual disabilities, raise money, and perform adequately under current 

government partnerships in providing health and educational opportunities for millions of 

people." https:/lwww. regulations.gov /#! docu me ntDeta il; D=WH D-2015-0001-5 149 

o America's Blood Centers "America's Blood Centers (ABC) represents North America's 

largest network of non-profit community blood centers ... As non-profit and community-
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based institutions, our concern stems from the significant impact to community blood 

centers across the country that such broad, sweeping change would have on our ability to 

continue to serve our communities ... The cost impact associated with the proposed 

overtime threshold [$1.5 million} will be associated with negative consequences for 

maintaining the infrastructure needed for a robust blood supply ... " 

https://www.regulations.gov/#!documentDetaii:D-WHD-2015-0001-4601 

Colorado: 

o Colorado Youth Corps Association «Paying overtime rates for staff members who operate 

residential programs would decimate program budgets and likely force many corps 

programs to either close or eliminate all camping/residential programs, ultimately hurting 

the low income corps members the regulations were meant to help. In addition, corps staff 

members typically work long hours in the field season and much shorter hours in the off 

season. Paying overtime in the field season would have a dramatic effect on these nonprofits1 ability to operate on their slim budgets." 

https:Uwww.regulations.gov/#!documentDetaii:D=WHD-2015-0001-5298 

o Colorado Behavioral Healthcare Council uour member organizations serve low-income and 

uninsured populations whose cost of care is covered primarily by Medicaid or state and 

local general funds. Medicaid reimbursement rates and grant funding levels are set by 

states, counties, or other third party entities. Thus, provider organizations like ours have 

limited ability to raise new revenue in response to increased costs of doing business. DOL's 

proposal to double the overtime pay exemption threshold would place a massive new 

burden on organizations already struggling to stay in business. Moreover, linking the 

threshold to inflation would force employers into perennially chasing a rising salary target 

without any ability to raise state-determined payment rates or otherwise ensure revenue 

increases to offset these changes." 

https:Uwww.regulations.gov/#!documentDetaii;D=WHD-2015-0001-2454 

o Young House Family Services "The proposed rule to increase the salary threshold to 

$50,440 per year for exempt employees would have a devastating financial impact on our 

agency and ability to continue to provide needed services to children and families in our 

area. This change would affect at least 45% of our current employees, including direct care 

professionals. Many of our caseworkers spend several hours each week just driving to 

<;lients1 rural homes to provide services, which adds to their work time. If this rule passes, 

for financial reasons we expect we would have to prohibit caseworkers from working more 

than 40 hours per week, which would unfortunately ultimately impact the direct services 

they provide to families ... In our "business11 we are not able to raise our fees, since those are 

established by the contractors chosen by the State of Iowa. This system is also currently 

undergoing major changes and we will now have to contract with 4 different managed care 

entities; we could be facing lower reimbursement rates in the future, which would also have 
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profoundly damaging effects on our agency revenue. 

https://www.regulations.gov/#!documentDetaii:D=WHD-2015-0001-5000 

Delaware: 

o Kent Sussex Community Services Since we depend on public funds to provide these services 

our contract re-imbursement rates and subsequent salary/wages are at the bottom ofthe 

scale. An increase in our costs without an increase in capacity for revenue would severely 

impair our ability to maintain work scope and quality standards expected in our state 

contracts and licensure. We have a disproportionate number of persons in supervisory, 

management or professional clinical roles who are paid well below 50,000 per year. We 

would like nothing better than to increase the salary/wage range for everyone but this 

would require a major overhaul of State and Federal budgets related to Behavioral Health 

public services. 

o Mosaic (also in Colorado, Iowa, and Nebraska) "Mosaic has received minimal provider rate 

increases in most of the states where we operate. Drastically increasing the overtime 

threshold will place an additional unfunded mandate on our organization. If states do not 

increase reimbursement rates, Mosaic and other providers would be put in a difficult 

position, which is compounded by stagnant and declining revenues and increased demand 

for services. Inevitably, increasing unfunded mandates without appropriate funding will lead 

to reduced hours for DSPs, increased turnover, and a potential disruption of services for 

people with intellectual disabilities." 

https://www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-5068 

Florida: 

o Sunrise Community, Inc (also in Maryland) "Sunrise currently provides many disability 

services at a net loss. Without a federal mandate for Parity of Home and Community Based 

waiver services as well as ICF/IDD services, the federal mandate to increase the wage 

threshold for exempt employees is too high for viable operations and the regional 

economies in which we operate. Regrettably, an unintended consequence ofthis Proposed 

Rule would be two-fold and include the destruction of much needed infrastructure for 

inclusive, community-based services as well as failure to transition people from institutional 

settings as mandated by the Olmstead Act of 1999. Adequate funding levels and parity of 

services across states are absolutely essential to meet the Proposed Rule. Without adequate 

funding, the Proposed Rule will force large scale closure of disability service providers on a 

national basis." https://www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-2278 

4 
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Idaho: 

o Development Workshop, Inc. "Currently, the state sets the service fee rate for 

rehabilitation services for people with disabilities and those who are underprivileged. The 

fee for service would not cover the increased costs associated with the proposed ruling and 

would hinder the ability of community rehabilitation providers to provide services. Its 

implementation would result in a reduction in necessary services aimed at helping 

individuals with disabilities, or who are disadvantaged, to gain and maintain their 

employment and greater independence." 

https://www.regulations.gov/#!documentDetaii:D=WHD-2015-0001-5483 

Iowa: 

o Riverview Center (also in Illinois) 11Riverview Center is a non-profit organization serving 

survivors of sexual and domestic violence in Iowa and Illinois. Our nearly 40 staff would 

greatly be impacted negatively by this change ... These new guidelines negatively impact 

Riverview Center clients as well. Survivors of domestic and sexual violence would have less 

access to advocates/therapists as their hours of work would be limited to reduce salary 

payments." https:Uwww.regulations.gov/#!documentDetaii;D=WHD-2015-0001-1889 

Kentucky: 

o ANCOR commissioned research from Avalere Health~ 

o Snapshot: http://cqrcengage.com/ancor/file/c3KOL6GjGYH/By%20the%20 

Numbers%200ne%20Pager.pdf 

o Full report: http:l/cqrcengage.com/ancor/file/usmhoUJ4DDK/ANCOR%20Cost%20 

lmpact%20Scoring%20Merno final.pdf 

o Kentucky data: http:Ucqrcengage.com/ancor/file/3zTOhlgQ5md/Kentucky%201DD% 

20Services%20Snapshot.pdf 

o The Bair Foundation (also in South Carolina) "In assessing the proposed FLSA overtime 

change, The Bair Foundation believes the impact on children in foster care will be 

unconscionable. The Bair Foundation is a therapeutic foster care organization that provides 

foster homes for children who are abused and neglected ... With salaries and benefits being 

40% of our budget, and a good percentage of our staff being affected by the change, our 

Company cannot withstand this huge and drastic change ... Services would be severely 

impacted and the continuous support of children in foster homes would be interrupted, 

which is a devastating occurrence in the life of a child. With over 400,000 children placed in 

the foster care system and 100,000 children available for adoption each year, if non-profits 

cannot take care of these children, who will?" 

https:l/www .reg ulatio ns.gov /#! docu mentDetaii;D=WHD-2015-0001-167 5 
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Louisiana: 

o Gulf Coast Social SeNices "Gulf Coast Social Services serves low-income and uninsured 

populations whose cost of care is covered primarily by Medicaid or state and local general 

funds. Medicaid reimbursement rates and grant funding levels are set by states, counties, or 

other third party entities-often at levels so low, we are forced to cobble together funding 

from multiple sources simply to keep our doors open and continue serving community 

members in need ... In addition to the impact on our behavioral health services, our services 

for persons with developmental disabilities would be severely impacted. Medicaid 

reimbursement rates for these services can only support management salaries in the 

$30,000 to $40,000 range. These managers are available to the consumers and Direct Care 

Companions while on call. By redefining the exemptions, management of the daily 

operations will be compromised and additional financial burdens will be added to an 

already marginal budget." https://www.regulations.gov/#!documentDetaii;D=WHD-2015-

0001-4592 

Maryland: 

o Community Behavioral Health Association of MD "(CBH) is the professional association for 

Maryland's network of community providers serving the majority of 160,000 children and 

adults who use our state's public menta! health system ... We do not support the proposed 

rule in its current form ... CBH members provide front~line treatment, rehabilitation, housing 

and related services to low-income and uninsured populations whose cost of care is covered 

primarily by Medicaid or state general funds. Medicaid reimbursement rates and grant 

funding levels are set by states, counties, or other third party entities ... Provider 

organizations such as ours have limited ability to raise new revenue in response to increased 

costs of doing business. DOL1

S proposal to double the overtime pay exemption threshold 

would place a massive new burden on organizations already struggling to stay in business. 

Moreover, linking the threshold to inflation would force employers into perennially chasing 

a rising salary target... many will be forced to close programs and lay off staff, resulting in 

fewer clients served and reduced access to critical mental health and addiction services for 

individuals in need ... The untenable financial pressure resulting from the proposed changes 

would force us into disastrous service reductions and program closures. 11 

https://www. regulations.gov/# !documentDetail; D=WH D-2015-0001-2448 

Massachusetts: 

o Nonprofit Human Services Organization 'trhe majority of the funding that we receive is 

through contracts with the Commonwealth of Massachusetts. These contracts are supposed 

to be reviewed bi-annually ... While some of our contracts have been reviewed, others have 

not been addressed in over five years and are substantially under funded by antiquated 

rates ... Our current lower level professional staff and managers are paid between $35,000 
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and $47,000 per year. An increase to the $50,440 would cause us to incur expenses in 

excess of $50,000 per year." https://www.regulations.gov/n!documentDetaii:D=WHD-2015-

0001-1187 

Michigan: 

o Michigan Federation for Children and Families "Wage expenses for the vast majority of 

nonprofit organizations would increase dramatically, with our members estimating an 

average increase of between 10 and 20 percent, as they adapt to the new thresholds that 

guide exempt and nonexempt classifications. In most cases, nonprofit child welfare 

organizations contract with government and other entities to provide critical services; those 

contracts are multi-year commitments and do not have the flexibility to cover increased 

costs. The financial viability of thousands of nonprofit organizations-both small and largewould be threatened if not destroyed. Overnight, facing 20 percent increases in personnel 

costs, many of our organizations would be forced to close their doors, hurting many of the 

very people that increased wages are supposed to help. The ripple effect of human service 

organizations going out of business or having their services seriously limited would extend 

to thousands of vulnerable children and families who had come to them for assistance." 

https://www.regulations.gov/n!documentDetaii:D~WHD-2015-0001-2515 

Nebraska: 

o CenterPointe "This change would have devastating financial impacts on our organization, 

costing over $200,000 per year over what we currently pay, based on very conservative 

numbers. As a non-profit, we do not have significant cash reserves, nor can we afford to 

provide care outside of the 8-5 work day at this cost. limiting work hours to control costs 

will compromise the care provided to an already fragile and underserved population." 

https://www .regu latio ns.gov tn !d ocu mentDeta il: D=WH D-2015-0001-5 190 

New Hampshire: 

o Monadnock Worksource " ... established in 1971 by a group of parents of teens and young 

adults with developmental disabilities. We employ an average of 23 full time staff ... given 

the rural nature and small size of our local towns, we are an employer of significant size ... I 

urge you to limit raising the salary threshold to no more than the 15'" percentile ... so that 

our agency, and similar agencies, can sustain the workforce we need to provide these 

services essential to the wellwbeing and increasing independence of the people we serve 

with disabilities and to their families. The proposed rule, if enacted as it stands, will erode 

our ability to provide the degree of supervision, training, and oversight necessary to 
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maintain a high quality of care within the constraints of our budget." 

https://www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-5591 

o Genesis Behavioral Health "Genesis employs 165 people, most of whom are full-time 

employees. Most of our exempt employees- managers and professionals-are currently 

paid less than $50,000, and under the Administration's proposal would become eligible for 

overtime. As a nonprofit organization with limited flexibility in the budget, I have serious 

concerns about how I will cover potential overtime expenses while still aiming to provide 

high quality services for our clients." 

https://www.regulations.gov/#!documentDetaii:D=WHD-2015-0001-4248 

New Jersey: 

o Foster Family-based Treatment Association "I write on behalf of the Foster Family-based 

Treatment Association, the only national association of providers of therapeutic/treatment 

foster care (TFC) ... Given that agencies are limited to public funds, the proposed minimum 

salary for exempt employees will result in numerous agencies closing down due to inability 

to meet the new salary requirements. As a result, the major advances in child welfare 

reform achieved by this Administration ... will be severely impacted and likely reversed 

forcing more youth into congregate care settings where staff hours/limits can be controlled, 

yet whose costs are significantly higher than community based care and whose outcomes 

are less favorable." https://www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-

1908 

South Carolina: 

o Habit for Humanity Grenville County, SC "We are the largest Habitat affiliate in the State of 

South Carolina with 33 full-time employees. We help families with an area median income 

between 30 and 60 percent obtain affordable, sustainable homes through 

homeownership ... the proposed changes will greatly impact the finances of our 

organization ... in order for us to keep these 13 employees in exempt status, we would have 

to increase salaries an additional $139,500 per year ... increase our overall salaries budget by 

approximately 11%." https:/(www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-

4541 

Washington: 

o Service Alternatives Inc. " ... we are a large employer in Washington State, with over 500 

employees ... our budget is dictated by the reimbursement rate set in our contracts by the 

state of Washington. When face with an increase in costs, we do not have the option of 
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11 raising prices'1 or otherwise passing on the costs .. .impact on employees ... positions may be 

cut ... some benefits may be cut...impact on clients and communities ... increased risk to health 

and safety ... can pose a direct threat to our ability to consistently ensure health and safety." 

https:ljwww.regulations.gov/ij!documentDetail:D=WHD-2015-0001-5504 

9 
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Sampling of Public Sector Comments from the Federa/l!eqister: 

Colorado: 

o RE-1 Valley School District "The Impact on a school district's budget will be hard 

hitting ... Our non~teaching staff are dedicated to our role in supporting students; that very 

often means we're working long hours ... You might think, as one of the staff who would be 

affected by the new minimum salary standard, that I would welcome the possibility of an 

increase, but 1

1

m more concerned that a requirement such as this will force layoffs or lower 

hourly salaries if forced to move staff to non~exempt status." 

https://www.regulations.gov/#!documentDetaii:D=WHD-2015-0001-3618 

Florida: 

o William Fritz, Indian River Schools, Florida ulserve as the Assistant Superintendent for 

Human Resources for a mid-size Public School District in Florida. The proposed changes to 

the salary basis test would extend overtime to approximately 35 of our employees. Given 

that we are one ol14,000 school districts in the United States, this change will create an 

undue burden on our Nation's schools. The State of Florida will not provide fiscal resources 

to remunerate the School Board, so this amounts to an unfunded mandate. The only way a 

school system can adjust for this change is to reduce services to students, given that our 

industry operates with low~overhead. Please maintain the salary basis test at its current 

level." https:/lwww .regulations.gov /#!docu mentDeta il; D=WH D-2015-0001-1885 

o Marion County Board of Commissioners, Florida "Marion County is concerned that DOL's 

proposed rule would more than double the overtime pay minimum salary level for 

an employee to qualify as 11 exempt 11 from overtime pay. This is a substantial increase over a 

one-year period. In Marion County, 129 of the current 238 exempt employees would be 

eligible for overtime pay. Marion County has estimated that the additional financial burden 

would cost the County as much as $1,773,587 in Gross Overtime So/aries in the first year 

alone~ in addition to other expenses, such as increased payroll taxes and benefit costs." 

https:Uwww.regulations.gov/#!documentDetaii;D=WHD-2015-0001-5087 

o Florida Department of Economic Opportunity (DEO) "DEO compared the results of its 

analysis with the estimates provided by the White House and U5DOL lor the affected 

workers and the costs associated with the Overtime Mandate. DEO's analysis shows the 

White House and USDOL overestimate by 195,000 the number of Florida workers who will 

qualify lor overtime, while seriously underestimating-by billions of dollars-the high cost 

to Florida businesses. DEO estimates that the Overtime Mandate will cost Florida 

businesses approximately $1.7 billion. DEO's Florida estimated cost, by itself, is 82.7% of 

USDOL's entire National Estimate of $2.08 billion." 

https:/lwww.regulations.gov/#!documentDetaii;D=WHD-2015-0001-5473 
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o Small County Coalition in Florida "Many of our small counties and school districts are 

fiscally constrained and operate on limited revenues. Many of our small local governments 

feel that these impacts could result in a reduction of services or increasing taxes." 

https://www .regulations.gov /# !docume ntDetaii;D-WH D-2015-0001-4486 

Iowa: 

o Iowa State Association of Counties "For example, in Clay County, lowa1 providing additional 

overtime to one employee would cost approximately $7,250 in the first year. Black Hawk 

County, Iowa has 87 employees that are currently exempt from overtime and 14 of those 

employees could become eligible for overtime under the proposed rules. Increased costs 

could easily outpace the ability of a county to bring in additional dollars through its taxing 

authority." https://www.regulations.gov/#!documentDetaii;D•WHD-2015-0001-5448 

Michigan: 

o Detroit Housing Commission " ... the vast majority of [public housing authorities] operate on 

thin, fixed budgets without sufficient reserves to meet what will constitute more than a 

doubling of the current salary requirements for exempt employees. PHAs, as a whole, are 

not revenue-generating entities. Unlike local units of government PHAs do not have the 

power to impose taxes to raise funds. Unlike a private employer, PHAs cannot make more 

"widgets" or increase the cost of its "widgets" to generate revenue. PHAs must accomplish 

their mission within the limited funds available to them ... Since PHA funding is finite, there 

will have to be some trade-offs. Either customer service would be negatively affected 

because overtime is limited or there would be fewer employees to do the work because 

PHAs will be required to leave positions unfilled for lack of funding. PHAs will yet again be 

requiring their employees to do more with less. There is, however, a point at which the 

needs of the customer cannot be met with limited staff resources so the PHAs' low and 

moderate income residents will suffer." 

https://www.regulations.gov/#!documentDetaii;D-WHD-2015·0001-4324 

New Hampshire: 

o City of Claremont "The City of Claremont, NH is opposed to these suggested changes. We 

are limited on funds and the employees receive very generous benefit packages and 

because they are unionized, we would be in a position that we would have to lay off 

workers." https://www. regulations.gov /#!docu mentDetail; D•WH D-2015-0001-0924 

South Carolina: 
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o Georgetown County Board on Disabilities and Special Needs uwhile our agency has always 

tried to thoughtfully abide by DOL rules and compensate its employees, we still will have a 

$60,000 per year impact to our budget in order to implement a salary threshold of this 

magnitude. Many workers who fall under these exemptions in our field started out as DSPs, 

and advanced into supervisory or administrative positions that require independent 

judgement and flexibility. We encourage their exempt employees to take part in various 

career and education enhancement and training programs in order to advance in their 

career paths. Placing restrictions on overtime for these employees would take away options 

for workers to pursue career-advancing extra activities, including participation in committee 

work and professional organizations that are foster career growth and professional 

development of workers." https://www.regulations.gov/#!documentDetaii:D=WHD-2015-

0001-4750 

Washington: 

o Jamestown S'Kiallam Tribe "The use of a single national salary threshold would adversely 

affect already limited revenues, especially for tribes in rural areas ... the average salary 

offered by many tribal governments and enterprises is substantially lower than the national 

average ... even though the proposed rule will directly and disproportionately affect Tribal 

governments, there has been no consultation on this ru!e~making." 

https://www.regulations.gov/#!documentDetaii;D=WHD-2015-0001-5627 
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Sampling of Small Business comments from the Federal Register 

Delaware: 

o Washington, Maryland, Delaware Service Station and Automotive Repair Association "We 

have heard the following from our membership on what business decisions this proposed 

rule may cause them to make: raising the prices of goods and services to pass on the cost to 

consumers; layoffs; changing employees from salary to hourly, which could impact benefits 

or mean reduced pay for weeks where less hours are worked; reducing base pay to account 

for overtime pay; turning full time employees into part time employees; reclassifying job 

duties; inability to expand the size of the business (slowing or stopping job creation); and 

providing less flexibility in hours worked." 

https://www.regulations.gov/#!documentDetaii:D=WHD-2015-0001-3900 

Florida: 

o Southeastern Alliance of Child Care Associations "Based on informal surveys of some of its 

centers' members1 SACCA estimates that up to 80% of child care directors in the Southeast 

are paid less than US DOL's proposed projected minimum salary level of $S0,440 per year, 

and that more than half of child care directors in the Southeast are paid less than $35,000 

per year." https://www.regulations.gov/#!documentDetaii:D=WHD-2015-0001-427S 

o Florida Farm Bureau Federation "The proposed rule will reduce entry-level management 

positions in agriculture particularly. Advancing from a picking crew member to crew leader 

or from a packing house shipper to supervisor is an achievement many workers aspire to. 

These low-level managers frequently lack advanced degrees and experience which would 

command high salaries. Still, increasing the employee's wages from hourly to salary can be 

significant in agriculture but fall well short of $970 per week. This is especially true when 

hourly wages are exempt from overtime pay due to the agriculture worker exemption. 

Instead of developing these early managers with training classes and greater responsibility, 

employers expressed that they would be more likely to limit their duties and hours and 

place more responsibility on their upper management or themselves." 

https:Uwww.regulations.gov/#!documentDetaii;D=WHD-201S-0001-2811 

Idaho: 

o Boise Metro Chamber of Commerce "Studies have shown that while a few workers will 

experience pay raises, millions will either see their hours reduced, or will see their salary 

reduced in anticipation of potential over-time." 

https:Uwww.regulations.gov/#!documentDetaii;D-WHD-201S-0001-3930 

Iowa: 
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o Iowa Bankers Association uan average, 8 percent of Iowa bank employees would be 

affected by the changes. Based on a survey we conducted of our member banks, the cost to 

bring current exempt employees to the proposed salary level could cost each bank, on 

average, $156,000 annually." https://www.regulations.gov/#!documentDetaii:D•WHD2015-0001-4746 

Louisiana: 

o Small Business Advisory Council of Louisiana "The cost estimates made by the DOL/WHO 

are wholly inadequate and inaccurate. Our members have given us much higher estimates 

for the cost of understanding the Impact of the changes in their specific workplaces, 

determining new administrative measures to limit overtime penalties while still 

accomplishing the mission of the business, setting up revised record keeping and payroll 

systems, and paying employees any overtime penalties they are due. 

https:/lwww.regulations.gov/#!documentDetaii;D•WHD-2015-0001-5746 

o Baton Rouge Area Chamber "Here in the Greater Baton Rouge Area, small businesses make 

up over 99% of local establishments and provide over 80% of all jobs in the region. A new 

and potentially dramatic increase in labor costs to these businesses is a real threat to the 

livelihood of Capital Region workers, and to the well-being of our communities. The 

proposed rules, if implemented, will have direct and severe impacts on business throughout 

the region- an area recognized by the Investing in Manufacturing Communities Partnership 

as one of the nation 1

s most important manufacturing corridors- while having few if any 

positive effects on payrolls." https:/lwww.regulations.gov/#!documentDetaii;D•WHD-2015-

0001-5293 

o First Heritage Credit" Sixty-two of our 74 Branch Managers make under $51,000.00 base 

salary. Eighty-one percent (62 of 74) of our Branch Managers would be reclassified to 

nonexempt under changes to the salary test. If there is a change in the duties test, 100% of 

our Branch Managers could possibly be reclassified, as the nature of our business 

necessarily requires them to do some "clerical" work." 

https:Uwww.regulations.gov/#!documentDetaii;D•WHD-2015-0001-5621 

Nebraska: 

o Nebraska Furniture Mart 11 is a home furnishings retail store that sells furniture, appliances, 

electronics and floorlng ... about 400 staff members will be affected by this change ... the 

minimum salary in place for exempt staff at Nebraska Furniture Mart per our compensation 

plan is $30,295.72 ... is market based, meaning we research what other companies in our 

markets pay for similar jobs. We classify each job into a pay grade with minimum 

compensation for each job at or above the market pay rate. Each year, we review the 

market pay for every job in our company, and make adjustments to pay in the case the 
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market dictates higher wages ... already offering staff competitive salaries. This significant of 

an increase in the minimum threshold for salaried staff will have a tremendous impact, 

especially for Midwest companies ... There are many actions that must take place prior to 

making large scale changes involving staff moving from salaried to hourly pay, some of 

which include: 

Changing staff status in both our HRIS and Payroll systems 

Changing compensation in both our HRIS and Payroll systems 

Making changes to benefits as hourly and salaried staff are eligible for different 

benefits 

Training salaried staff who move to hourly on using various time clocks throughout 

the building1 time clocks on their computers and managing their time 

• Training salaried staff who move to hourly how to use and input PTO requests as 

this process varies for hourly and salaried staff 

• Training managers who currently supervise only salaried staff on proper 

timekeeping for hourly staff 

https:Uwww.regulations.gov/#!documentDetaii:D=WHD-2015-0001-2827 

New Hampshire: 

o Kennebunk savings /(Kennebunk Savings is a mid-sized community financial 

institution ... which operates throughout ... seacoast New Hampshire ... employ over 300 

people ... support our community, and when we thrive they thrive. This year we'll give back 

10% of our earnings-over $790,000-to nonprofit organizations ... detrimental impacts will 

be: cut backs in employees or hours .. .fewer new job opportunities ... our employee base is 

more than 85% female and many of our employees face demands as caregivers for children 

or aging parents ... our ability as an employer to offer flexible schedules means a great deal to 

their overall well-being and engagement with the company. The proposed rules will have a 

detrimental effect on allowing flexible schedules for our employees" 

https:Uwww.regulations.gov/#!documentDetaii:D=WHD-2015-0001-5312 

o Seacoast Mental Health Center, Inc. ''For too many years we have tried to absorb costs on 

the backs of employees to mitigate the erosion of services for consumers in need. We can 

no longer do that. Should these rules go into effect, particularly when paired with our 

current funding environment, we will have fewer staff providing fewer services to fewer 

clients. The untenable financial pressure resulting from the proposed changes would force 

us into disastrous service reductions and program closures." 

https:Uwww.regulations.gov/#!documentDetaii;D=WHD-2015-0001-2569 

New Jersey: 

o Atlantic Stewardship Bank 11is a full service commercial bank with 12 branches and employ 

151 associates and feel strongly this new rule will negatively impact the bank's employees 
302 

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and future consideration for their advancement ... at our bank we are already addressing 

changes to associates and their career path in order to accommodate this proposal. Several 

Associates will not be promoted which will negatively affect their salary and 

responsibilities ... the proposal will cause a significant decrease in morale among exempt 

employees who become nonexempt" 

https://www .regulations.gov /# !docume ntDetail· D=WH D-2015-0001-3901 

South Carolina: 

o Famous Toastery, in WSJ Article ua restaurant chain with six locations in North Carolina and 

South Carolina, some jobs are changing to ensure the company doesn't face runaway labor 

costs. The chain is moving managers from salaried to hourly pay and asking employees to 

perform new duties ... the company is installing fingerprint scanners to be used for punching 

in and out of shifts, so that workers cannot clock in for a co-worker who is late. Company 

leaders will also receive alerts if any employee is nearing 40 hours and still has more shifts 

left that week, allowing management to intervene before overtime kicks in." 

http://www.wsj.com/articles/overtime-rules-send-bosses-scrambling-1437472801 

Washington: 

o Building Industry Association of Washington " .is the champion of affordable housing in 

Washington State and represents nearly 8,000 member companies engaged in all aspects of 

new home construction and remodeling ... reconsider the proposed rule as changes to the 

current overtime standard will reduce job advancement opportunities ... leads to 

construction delays, increased costs and fewer affordable housing options for 

consumers ... this new rule will negatively impact over 3,500 employees in the residential 

construction trade." https://www.regulations.gov/#!documentDetaii·D=WHD-2015-0001-

2897 

Wyoming: 

o 21" Century Equipment LLC. (also in Colorado and Nebraska) "My Company, 21" Century 

Equipment, LLC is a John Deere Agricultural Equipment dealer. As a small business owner, 

we currently employ approximately 400 full-time employees, of which 68 would potentially 

be affected by this proposed change ... Should we convert everyone affected by the rule 

change to non-exempt, overtime would cost us up to $700,000 per year ... Employees in my 

company earn income far in excess of the proposed salary levels, however, that level is 

reached through base salary (which does not meet the minimum salary proposal) plus 

commission and incentives that are in place to insure optimal job performance." 

https://www.regulations.gov/#!documentDetaii·D=WHD-2015-0001-4752