‘Breathtakingly radical’: Acosta questions legality of any overtime threshold

March 23, 2017 - by: Kate McGovern Tornone 0 COMMENTS

President Donald Trump’s nominee for secretary of labor has questioned whether the U.S. Department of Labor (DOL) has the authority to set any salary threshold for overtime pay—not just the pending increase that would raise the threshold to $47,476.

Alexander Acosta volunteered that concern twice during his March 22 confirmation hearing, despite no questions from lawmakers to that effect. A former DOL economist who worked under President Barack Obama called Acosta’s statements “breathtakingly radical,” noting that an overtime threshold has been in place since 1938.

Background

The Fair Labor Standards Act (FLSA) requires employers to pay overtime to employees earning less than $455 per week ($23,660 per year), regardless of whether they meet one of the law’s duties tests for exemption. The Obama administration issued a final rule that more than doubled the threshold, but a federal district court judge temporarily blocked it just days before it was set to take effect in November 2016.

Judge Amos Louis Mazzant III, who was nominated to his position by Obama, determined that Congress clearly intended the FLSA’s white-collar exemptions to apply to employees who actually perform executive, administrative, and professional duties—not just employees who meet a salary requirement. Nothing in the law indicates that Congress intended that the DOL would set a minimum salary level, he wrote in his order enjoining the rule.

In a footnote, however, Mazzant said he was not taking a position on the general lawfulness of an overtime threshold. “The Court is evaluating only the salary-level test as amended under the [DOL’s] Final Rule,” which was so high that it supplanted the duties test, he said. Obama’s DOL immediately appealed the order, and the Trump administration has until May 1 to decide whether it wants to continue with the appeal.

The current, lower threshold was adopted in 2004 under President George W. Bush. Just last week, Tammy D. McCutchen, the Wage and Hour Division (WHD) administrator at the time, told attendees at a conference that she is fine with an increase but believes that $35,000 to $38,000 is the appropriate range. McCutchen is reportedly under consideration for solicitor of labor.

Acosta’s position

During the hearing, Acosta generally was silent about his plan for the litigation challenging the order enjoining the overtime rule. Members of Congress—Senator Elizabeth Warren (D-Massachusetts), in particular—asked him directly and repeatedly whether he would defend the rule in court or drop the appeal.

Acosta spoke at length about the need to balance protections for workers against the economic impact of the overtime rule. However, when it came to the litigation, he promised only to consult with the DOL and U.S. Department of Justice officials who defended the rule under Obama.

Acosta, however, then questioned the appropriateness of a DOL-determined threshold at all:

A related issue to this is the question of whether the dollar threshold is within the authority of the secretary. When Congress passed these statutes, it provided in essence for a duties test[,] and one of the questions that’s in [the] litigation is: does a dollar threshold supersede the duties test and as a result is it not in accordance with that law? And I mention that because I think the authority of the secretary to address this is a separate issue from what the correct amount is and the litigation needs to be considered carefully [not only] with respect to what would be the appropriate amount if the rule were to be changed or revised but also [with respect to] what is within the authority of the secretary to do.

Later, when questioned about whether a lower threshold would be appropriate, Acosta offered the same sentiment:

Because of the size of the increase[,] there are serious questions as to whether the secretary of labor even has the power to enact this in the first place[,] which is what . . . the basis of the litigation is.

The committee members, however, focused on a potential lower threshold. Even officials at the Society for Human Resource Management (SHRM) have consistently said that although the threshold is due for an update, the final rule merely went “too far, too fast.”

“It is breathtakingly radical for a labor secretary nominee to be questioning the authority of the Labor Department to set the overtime threshold,” Heidi Shierholz, former chief economist at the DOL under Obama, said in a statement. “The Labor Department has exercised this authority since 1938, and has done so under 10 presidents, including Franklin D. Roosevelt and George W. Bush. Congress has amended the [FLSA] many times and has never objected to the salary test,” said Shierholz, who now works at the Economic Policy Institute, which describes itself as a think tank focused on the needs of low- and middle-income workers.

Other DOL regulations

Acosta was tight-lipped about other DOL regulations. Warren asked him to comment on the silica rule, an Occupational Safety and Health Administration (OSHA) regulation that is in effect but faces legal challenges. She asked him to promise that he would not weaken the rule, but he said he would be bound by Trump’s Executive Order (EO) to review all rules once confirmed. “Based on that executive action, I cannot make a commitment because the [DOL] has been ordered to review all rules,” he said. He added, however, that the DOL would enforce rules as long as they are in effect.

Acosta similarly dodged questions about the DOL’s fiduciary rule, again citing an EO specifically directing the DOL to revisit that rule. “You’ve refused to answer my questions, hiding behind an executive order,” Warren said. “I’m not asking you how you will respond to President Trump’s executive order; I’m asking you about what your priorities will be if you’re confirmed.”

Senator Lamar Alexander (R-Tennessee) defended Acosta, saying it would be presumptuous of him to take a position on the regulations in question before consulting with DOL staff.

Acosta’s philosophy

When asked how he would implement Trump’s proposed 21 percent cut to the DOL’s budget, Acosta said he would not advocate for an across-the-board reduction for all DOL programs. Instead, he believes that the success of initiatives should be evaluated individually and their budgets adjusted accordingly.

Acosta offered the example of job corps centers, which Trump took aim at in his budget proposal. The DOL should consider which centers are successful and which ones are not; it must consider states’ and localities’ individual needs, he said.

Senator Patty Murray (D-Washington) asked whether Acosta will bow to political pressure should he be confirmed. “You have to stand up for workers,” she said. “That will be your job.” In reply, Acosta said officials shouldn’t bow to such pressure but, at the same time, Trump is the boss.

“We all work for the president[,] and we all will ultimately follow his direction unless we feel that we can’t,” Acosta continued. “And if we can’t, we resign.”

Now that the transitional dust is starting to settle, join us on March 28 for an in-depth webinar discussing how newly issued presidential Executive Orders and other White House initiatives and appointments will affect your workplace. Click here to register.

About Kate McGovern Tornone:
Kate Tornone is an editor at BLR. She has almost 10 years’ experience covering a variety of employment law topics. Before coming to BLR, she served as editor of Thompson Information Services’ ADA and FLSA publications, coauthored the Guide to the ADA Amendments Act, and published several special reports. She graduated from The Catholic University of America in Washington, D.C., with a bachelor of arts in media studies. Kate can be reached at ktornone@blr.com.
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