Federal Department of Labor Overtime Rules
Congress Should Encourage the DOL to Recalibrate its Proposed Overtime Rules
Background: In June, the Department of Labor (DOL) proposed increasing the salaries test of the white collar exemption in the Fair Labor Standards Act (FLSA) from its current threshold of $23,660 to $50,440 annually ̶ a 113 percent increase. If finalized without any changes, this would mean that many currently exempt employees would no longer be considered exempt, and therefore, would need to be paid overtime for more than 40-hours of work in a week if they make an annual salary of less than $50,440.
The Newspaper Association of America (NAA) represents 2,000 newspapers in the United States. While NAA believes the salary threshold should be increased, a doubling of the current standard would add unsustainable costs on newspapers. The DOL proposal simply goes too far, too fast.
NAA Supports a More Reasonable Increase
The current salaries test, which hasn’t changed since 2004, should be increased. However, right-sizing the rule is critical. The Administration should not address a decade of inaction with a 113 percent increase in the salary threshold. This more than doubling of the standard will result in unintended consequences that will hurt workers who enjoy the benefits and flexibility that comes with being exempt employees. Congress should work with the Administration to recalibrate this proposal in a way that would not further damage an industry critical to providing news and local information, and the employees who provide it.
Rule Would Exacerbate Painful Contraction in the Newspaper Industry
According to an NAA survey of its members, the newspaper industry would have to spend more than $130 million to raise exempt employees to the new standard. This would come at a time of well-documented challenges for the industry. As a result of the Great Recession and structural changes in the industry, total newspaper revenue has declined from $48.8 billion in 2008 to $36.2 billion in 2014. Print advertising revenues continue to decline as newspapers explore new business models. In short, there are no excess revenues to bring exempt employees up to a $50,440 salary threshold. The proposal will require newspapers to cut costs or restructure operations to meet the new standard.
Cuts in the Newsroom Would Hurt Existing Employees
According to the NAA survey, everything from circulation to the newsroom will be impacted by the proposal, and in order to comply, newspapers will either replace full-time employees with part-time employees or convert current exempt employees to hourly employees. As a result, current employees could see a reduction in benefits, workplace flexibility and career advancement.
Cuts in the Newsroom Would Hurt the Public Interest
Throughout history, newspaper journalism has served as a watchdog for a free, democratic society. According to the NAA survey, 46 percent of newspapers said they would be forced to make cuts to newsroom staff in order to accommodate the DOL’s proposal. Less journalistic resources at newspapers means a reduced focus on local content, less digging, fewer stories, and less informed communities.
DOL’s Proposal Doesn’t Recognize Regional Cost-of-Living Differences
The proposed rule disregards the impact on areas of the country with a lower cost of living. The proposed minimum salary threshold is nearly $10,000 higher than California’s overtime law and nearly $15,000 higher than New York. What works in New York and San Francisco won’t necessarily work for Rapid City, or Little Rock. The DOL should take into account regional differences just as the Federal government does with “locality adjustments” for salaries of employees in 33 regions around the country.
DOL Used Unprecedented Methodology
Historically, in an effort to balance regional cost-of-living differences and the effects on non-traditional businesses, the Department of Labor would set the salary test threshold between the 10th and 20th percentile of all current full-time exempt employees. In 2004 – when the threshold was last updated – the DOL set the threshold at the 20th percentile of all currently exempt full-time employees. As it stands, the current proposal would set the salary threshold at an unprecedented 40th percentile, resulting in a 113 percent increase in the current threshold. The Department has not provided a clear justification on this drastic change in methodology.
NAA CEO David Chavern has written an op-ed on this issue. See David Chavern's op-ed.