Punching In: Overtime Proposal Provisions You May Have Missed

Monday morning musings for workplace watchers.

Overtime Rule ICYMI|Su Saga Continues

Rebecca Rainey: Now that there’s been some time to digest the 236-page proposal from the US Department of Labor that would extend overtime protections to more workers, Punching In wanted to run down some provisions of the proposal that may have initially been missed:

Preparing for a fight: In light of the litigation that followed attempts by previous administrations to update overtime regulations, the Biden DOL acknowledged in its rulemaking that its proposal could face the same fate. As an insurance policy of sorts, the Biden DOL’s proposal includes a severability provision to ensure that if one piece of the rule is eventually invalidated in court, other parts of the rulemaking would still stand.

“What the department is saying is that even if one piece of this is held unenforceable, their position is the rest of this new proposed rule should remain in place,” Jason Rossiter, of counsel at Kaufman Dolowich & Voluck, LLP, said in an interview. “So it would complicate any kind of legal challenge to this rule, and I think there will be legal challenges to this rule.”

Annual threshold updates: The Biden DOL included a provision in the rulemaking to update the salary threshold under which employees are automatically owed overtime pay every three years. Under the proposal, the salary level would adjust tri-annually based on “the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region,” data that’s published by the US Bureau of Labor Statistics.

While the assumption is that the threshold will rise over time, Rossiter noted that could also mean the threshold could adjust down in the future if earnings were to dramatically fall.

“It’s kind of a theoretical issue, but the automatic updating provision in the rule isn’t necessarily an automatic increasing,” he said. “So if labor statistics show a decrease in overall wages, the way this rule is written that could result in a decrease in the threshold.”

Potential for raises: Under current overtime rules, to be exempt from time-and-a-half pay requirements, workers must be salaried, make more than a certain amount of money each year, and have certain job duties, like management or sales. The Biden administration wants to change the salary piece of the test to ensure workers making less than about $55,000 annually are automatically owed overtime pay, a bump from the current level of $35,568.

Both the DOL and management-side attorneys note that businesses may just give their workers a raise to push them above that salary threshold and back into exempt status in response to the new rule.

“That’s about a $20,000 gap that employers are going to have to really consider which way they go,” said Phoebe Cachuela, associate general counsel at Magnit, a workforce management platform. That approach could be tricky, however, under the proposed schedule to continuously update the threshold. “In terms of how businesses can cope with that nowadays, I think there is no real way for businesses to really look definitively and say, a year down the line, this is where we’re going to be,” she said.

The DOL estimates that if the rule is finalized, it would result in $1.3 billion in income being transferred from employers to workers, including for those employers “who may choose to increase the salary of some affected workers to at least the new threshold” so that they can continue to count their workers as exempt.

Regardless of how things shake out in court, Cachuela noted that companies should still see the potential changes to overtime rules as a bellwether for future labor market demands.

“Businesses should be proactive about thinking about this holistically in terms of where they want to be in terms of legal compliance, but also in terms of culture,” she said. “Do businesses want to be ahead of the game in providing this to workers to attract them, or do they want to be kind of very closely tailing the law?”

What’s next? The proposal is now open for public comment. The DOL will be accepting input until Nov. 7.

Acting Secretary of Labor Julie Su (2nd R) attends a meeting with the Investing in America Cabinet, hosted by President Joe Biden, at the Roosevelt Room of the White House on May 5, 2023 in Washington, D.C.

Photo by Alex Wong/Getty Images

Diego Areas Munhoz: Sunday marked the 180th day since President Joe Biden nominated Julie Su to serve as Labor Secretary, and she’s still in a holding pattern as acting chief, with no resolution in sight.

Su’s high-profile nomination has lingered in the Senate as it increasingly looks like she doesn’t have the support of the full Democratic caucus. But Su hasn’t resigned or been withdrawn from nomination by the White House, and the department is full steam ahead issuing and proposing high-profile rules.

Congressional Republicans have expressed outrage over the administration’s handling of the nomination, saying the White House is circumventing the Senate’s constitutional Advice and Consent powers. But with Democrats in control of the Senate, their options for derailing Su are limited.

At least one lawmaker is turning the tool any member of Congress can always rely on: legislation.

Louisiana Sen. Bill Cassidy, the top Republican on the Senate’s labor panel, introduced a bill last week that would prohibit agency deputy secretaries nominated for the secretary job from performing the duties of agency chief for longer than 210 days after the nomination’s submission.

“What the White House is doing is establishing a precedent,” Cassidy told Bloomberg Law, noting that his bill should have bipartisan interest. “What goes around comes around.”

His primary concern is that Su’s situation may open the doors for other presidents to nominate individuals that can’t be confirmed by the Senate and keep them there anyway. Su is the longest cabinet-level nominee to wait for a floor vote when the nominating party controls the White House and the Senate, according to Cassidy.

A provision of the two-page bill would have the 210-day time limit specifically apply to a “a Deputy Secretary of Labor that is performing the duties of the Secretary of Labor” before enactment of the legislation.

The 210-day clock comes from the Federal Vacancies Reform Act, which governs most agency acting appointments. The law says that acting officers may serve for 210 days from the date the role is vacated by the outgoing official.

Su is serving under a DOL statute that created the deputy secretary position that doesn’t establish a time limit, however, which has enraged Republicans. But even if serving under the vacancies law, the clock would pause as long as Su is under consideration by the Senate, leaving her in the same situation.

Until Cassidy’s bill passes or Su is confirmed—both look unlikely—the status quo seems likely to remain, and Su will continue to lead the DOL as it regulates independent contractors and overtime pay, and navigates major potential strikes by unions like the United Auto Workers.

We’re punching out. Daily Labor Report subscribers, please check in for updates during the week, and feel free to reach out to us.