DOL Hints at Unfinished Business in New Regulatory Agenda

Proposed overtime rule pushed back to March, joint employer and tip regulations coming

The U.S. Department of Labor bumped its proposed rule on overtime exemptions back to March. / ED BROWN

In case employers have forgotten, the Department of Labor has some big-ticket regulatory changes in store for them. 

The Trump administration on Oct. 17 released its regulatory agenda for fall 2018, which lists the regulations various agencies are looking to add — and in many cases roll back — over the next year or so. The agenda indicates that the U.S. Department of Labor’s proposed overtime rule is still in the works but will be pushed back from January to March. The agency also indicated it will propose a rule on joint employment under the Fair Labor Standards Act by the end of the year and a rule regarding tips soon.

Attorneys dealing in federal regulations often look over the regulatory agendas for specific agencies as they come out twice each year. The Labor Department’s listings for fall 2018 are especially interesting to FLSA-covered employers considering the deregulatory actions it has yet to issue.

“[The regulatory agenda] is useful because it identifies the priorities that the agency has for the coming six months or so,” said Sue Schaecher, a partner at employment firm Fisher Phillips’ Denver office. In the listings, the agencies do set a schedule for the various actions they want to take, “but they’re not carved in stone and priorities change,” she noted.

An attorney can tease out some “helpful hints” in the regulatory agenda that will indicate the direction the agency will take with the rule, but more helpful are the public comments the agency’s officials have made and their “political will,” Schaecher said.

Earlier this month, Labor Department Secretary Alexander Acosta told attendees at a U.S. Chamber of Commerce event that his agency was “just getting started” on its deregulation agenda and that there was “a lot more to do.”

The Overtime Threshold

The most impactful rule that the Labor Department has pending will address the salary level that white-collar workers must earn in order to be exempt from overtime pay under the FLSA. Leading up to the rule, the department has been holding several listening sessions in cities across the U.S., including one in Denver held last month, to get public input on where to set the salary threshold.

Currently, white-collar workers must make a minimum of $23,660 a year in order to be exempt from overtime pay. The Labor Department under the Obama administration sought to raise that threshold to $47,476, but a federal court in Texas struck down the proposed rule as invalid under the FLSA.

In a congressional hearing in November 2017, Acosta told committee members he thought the current threshold was too low, but to more than double it like the Obama rule intended would have “created a shock to the system.” During his confirmation hearings in March 2017, Acosta got so specific as to say the salary threshold should be adjusted for inflation since 2004 — the last time the figure was updated — raising it to around $33,000. However, his opinions on the proper threshold might have shifted given the time that’s passed and the public input received since then.

Schaecher said it’s fair to predict that the new overtime rule will be more moderate than the ill-fated version under Obama — that is, lifting the salary threshold above the current $23,000 but below the previous rule’s $47,000. For lawyers or analysts to make a prediction any more specific than that is “maybe a bit of crystal ball gazing,” she added.

The Joint Employer Standard

Joint employer definitions are critical in determining whether companies could be held liable for unlawful employment practices of the contractors, franchisees and staffing agencies they work with. 

The Labor Department is expected to adopt a more employer-friendly joint employer definition that will help maintain those liability boundaries when it comes to wage-and-hour disputes.

Last month, the National Labor Relations Board proposed a rule to narrow the definition of joint employers when it comes to union activity and unfair labor practice charges. Employment attorneys have been watching other federal agencies, like the Labor Department, to see if they’ll follow suit. Last summer Acosta rescinded previous wage and hour administrator guidance that said it would use an ‘expansive view’ of joint employers under the FLSA and the Migrant and Seasonal Agricultural Worker Protection Act.

According to the regulatory agenda, the Labor Department plans to propose an FLSA joint employer rule in December. The rule will “clarify the contours of the joint employment relationship to assist the regulated community in complying with the Fair Labor Standards Act,” according to the agenda.

Acosta told Bloomberg Law last month that his agency is trying to keep up with current workforce dynamics, which include the gig economy and the proliferation of independent contractors. “How we approach work is changing, and we need to start looking at our rules and recognize that what fit 20 or 30 years ago is not going to fit for the modern workplace.”

The regulatory agenda largely echoes that sentiment, saying “The Department believes that changes in the 21st century workplace are not reflected in its current regulatory framework.” Exactly how the agency will “update” the joint employer definition for the modern workplace remains to be seen.

The FLSA Tip Regulations 

Another significant item on the Labor Department’s regulatory agenda, albeit one that affects fewer employers, is a rule for how companies must handle the tips their employees earn under the FLSA.

The spending bill Congress passed in March included amendments to the FLSA that banned employers from keeping tips their employees earn. The bill also withdrew the agency’s 2011 guidance that prohibited employers from sharing tips with workers who don’t customarily receive them, like cooks. But employers were banned from including managers or supervisors in any tip-pooling arrangements.

The fact the Labor Department has a tip rule ready to propose is significant, Schaecher said. The rule will align Labor Department regulations on tip management with the recent FLSA changes, but it will also “possibly answer some unanswered questions about how that will all apply.” For example, the March amendment doesn’t go far enough to define who exactly is a manager or supervisor at a given business, she said.

— Doug Chartier

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