DOL Questions About Duties Tests Should Concern Employers

By Allen Smith Jul 8, 2015
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Employers breathed a collective sigh of relief when the Department of Labor (DOL) issued its proposed overtime rule and announced it was not proposing specific regulatory changes to the duties tests for determining exempt employees at this time. But that doesn’t mean the DOL won’t at some point down the road, cautioned John Thompson, an attorney with Fisher & Phillips in Atlanta.

“The main takeaways as to the duties tests are that DOL remains very interested in making them harder to meet and employers should not assume that there will be another opportunity to comment upon changes in those tests,” Thompson told SHRM Online.

Department’s Questions

The department seeks comments on a number of questions about the duties tests in its discussion of proposed regulatory revisions, asking:

  • What, if any, changes should be made to the duties tests?
  • 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 amount be?
  • Should the department look to California law, requiring that more than 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?
  • Does the single-standard duties test for each exemption category appropriately distinguish between exempt and nonexempt employees? Should the department reconsider its decision to eliminate the long- and short-duties test structure?
  • Is the concurrent duties regulation for executive employees—allowing the performance of exempt and nonexempt duties concurrently—working well or does it need to be modified? Alternatively, should there be a limitation on the amount of nonexempt work that an exempt worker can perform? To what extent are exempt lower-level executive employees performing nonexempt work?

‘Ambush Rulemaking’?

“I think employers should anticipate that the DOL will make changes to the duty requirements and, in essence, engage in ‘ambush rulemaking,’ which denies employers a meaningful opportunity to comment on concrete proposals,” said Lee Schreter, an attorney with Littler in Atlanta.

Tammy McCutchen, an attorney with Littler in Washington, D.C., and former Wage and Hour Division administrator, asserted at the Society for Human Resource Management 2015 Annual Conference & Exposition on July 1, 2015, “An argument could be made that under the APA [Administrative Procedure Act], DOL is effectively precluded from making changes because they have not given the public notice and the opportunity to comment.” But she emphasized that the “DOL has not stated that they will make no changes to the duties tests and has asked for comments on some specific changes.”

Employers should still steel themselves for the possibility of a double whammy—an increase in the salary level and more stringent duties tests, according to Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and a former acting administrator of the Wage and Hour Division.

He remarked that “Employers could have a final rule that includes both a markedly higher salary level and more stringent duties tests that limit the amount of nonexempt work that an exempt employee may perform, all of which may result in fewer exempt employees and may necessitate changes to their business models.”

But the department instead may opt to first raise the salary level and then tackle the duties tests., according to David Barron, an attorney with Cozen O'Connor in Houston. “DOL appears to be taking these changes in steps to avoid two battles at once,” he said. “Employers should expect the salary level increase early next year, followed by some tinkering with the duties test regulations in late 2016.”

The rosiest scenario for employers would be if the DOL doesn't change the duties tests, which remains a possibility. “The DOL does not appear convinced that a change in the duties tests is warranted, given the increase in the minimum salary level and the agency's long-standing belief that the salary level is the best single test of exempt status,” noted Allan Bloom, an attorney with Proskauer in New York City.

That said, “The DOL remains free to simply insert its preferred changes to the job duties test in the final rule without any further comment,” observed Michael Arnold, an attorney with Mintz Levin in New York City. “Many expect that is the course it will take,” even though this would “undercut the purpose and effectiveness of the notice-and-comment period.”

Possible Tradeoffs

“The department has implied through its requests for comments that if employers do not agree with the increased salary-basis test across the board for all industries and regions, the department may implement a two-tiered system, where employers can choose either the uniform proposed salary basis, or a lower salary basis coupled with a California-style 50 percent primary duties requirement,” said Joel O’Malley, an attorney with Dorsey & Whitney in Minneapolis.

“It’s unclear to me what the department’s tolerance level is on lowering the salary level from the proposal. I’d guess that they would not drop it more than the 30th percentile, but that drop would come with significantly more stringent duties requirements,” said Alexander Passantino, an attorney with Seyfarth Shaw in Washington, D.C., and former Wage and Hour Division acting administrator. “It seems to me that the department made a decision to set up a battle between those industries that would be OK with a salary increase in exchange for no duties test changes and those for whom a salary increase would cause massive problems with their staffing models. The comments here will be very interesting.”

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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