Comments on Proposed Rulemaking Governing Minimum Wage LAB-42-16-00015-P
December 1, 2016
NYS Department of Labor
Building 12, Room 509
State Office Campus
Albany, NY 12240
Dear Mr. Paglialonga:
The Business Council, New York’s largest statewide employer association, respectfully submits these comments on the Department’s proposed rulemaking governing the minimum wage.
While our objections to the state’s new minimum wage structure and the adverse impact it will have on job growth are well documented, we would like to take this opportunity to express our dismay at the other “proportional increases” addressed in this proposed rule.
Specifically, we are concerned with the Department’s proposal to significantly raise the minimum salary levels that Executive and Administrative employees would have to earn to be considered exempt from the overtime.
This proposed rule will impose additional costs and compliance burdens on New York State employers, especially small businesses and not-for-profits, at a time when they are already dealing with major increases in the minimum wage, a pending paid family leave mandate, rapidly rising workers’ compensation costs, and others – factors from which employers in most other states are largely exempt.
As you know, New York State’s salary level for these exempt positions (currently $675 per week) is already nearly fifty percent higher than the salary levels required by federal law ($455 per week). As you are also aware, efforts by the US Department of Labor to significantly increase the federal minimum salary levels were recently enjoined by a federal judge.
In essence, the federal court ruled that the Fair Labor Standards Act was intended to exempt employees from overtime based on actual duties performed, and did not include a minimum salary level. (State of Nevada v. US Department of Labor, Civil Action No. 4:16-CV-00731).
Given that New York overtime rules rely on the FLSA (see 12 NYCRR §142-2.2), we believe this proposal is contrary to the federal court finding. By “proportionally increasing” the minimum salary levels for exemption for Executive and Administrative professionals to levels that will be significantly above even those proposed by the US Department of Labor and rejected by a federal judge, the Department is creating a de facto salary test for exemption contrary to the intent of Congress in the FLSA.
In addition to this litigation concern, we are concerned that the proposed increase in the state’s overtime wage threshold is being based on rote formulary, rather than an evaluation of the rule’s potential impact. State labor law §652.2 governing the minimum wage provides that existing wage orders “. . . shall be modified by the commissioner to increase all monetary amounts specified therein in the same proportion as the increase in the hourly minimum wage . . . and that “the modified orders. . . shall become effective on the effective date of such increases in the minimum wage . . .” suggesting a lack of discretion – or reasoning - in the Department’s proposal.
But this rulemaking provides the ideal opportunity to revisit the state’s approach to setting overtime standards, and for a reconsideration of the extent of the Department of Labor’s legislative mandate in this arena. This proposed rule should also be evaluated in light of recent, costly legislative mandates imposed on employers in New York as well as the national concerns raised regarding the impact of the proposed U.S. Department of Labor overtime rule. In this context, we question the justification for adopting a state threshold that will start at a level 60 percent above the national standard upstate, and 80 percent above the national standard in New York City, and quickly rising to levels more than double and nearly two and one half times the national standard, respectively.
We believe that the state labor law provides for an alternative approach. The Commissioner can employ Labor Law §659, regarding “Reconsideration of wage orders and regulations,” whose subdivision §659.2 authorizes the commissioner “. . . to propose such modifications of or additions to any [wage order] regulations as he may deem appropriate . . .” without empaneling a wage board. These amendments can be made effective thirty days after publication. Section 659 provides an opportunity for the Commissioner to reconsider rote increases in Departmental regulations that will impose significant new costs and compliance burdens on employers.
Moreover, we believe the state needs to reassess the statutory basis for the state’s overtime rule, as the basis for a broad-based overtime wage threshold in New York State Labor Law is narrow at best. The statutory authority to adopt regulations related to overtime are set forth in Labor Law §655.5(b), a subdivision entitled “Minimum wage recommendations.” This section of law provides, “in addition to recommendations for minimum wages, the wage board may recommend such regulations as it deems appropriate to carry out the purposes of this article [i.e., Labor Law Article 19, the minimum wage act, italics added] and to safeguard minimum wages. . . Such recommended regulations may also include, but are not limited to . . . overtime or part-time rates . . . “ The broad-based overtime rule set forth in the minimum wage-related wage order, and that is the subject of this current rulemaking, goes well beyond any measure necessary to implement the legislatively-approved minimum wage act. As example, the Department has stated that that its policy is to set its overtime threshold at 75 times the state minimum wage, a calculation that is not found anywhere in the state labor law and clearly beyond the scope of what is necessary to carry out the purposes of the minimum wage act.
The impact on New York employers of the new exempt salary levels will only add to the cumulative negative effect of the new minimum wage. Employers will incur increased labor costs as exempt employee salaries are increased to comply with the new excessive salary levels – reaching more than $50,000 per year in some parts of the state – or increased overtime expenses as employees fall below the threshold and become non-exempt. This change will have a particularly harsh impact on small business and not-for-profits, with their limited staffing and budget flexibility, who will have to make decisions to reduce services as a result of the new proposed salary levels. The impact analysis required under the State Administrative Procedures Act makes no mention of the impact that these overtime rules will have on either small business or non-profits.
As a final issue, the direct cost of the increased overtime wage threshold is in addition to the increased administrative burden on already overburdened New York employers. Today, New York employers manage minimum wage rates for fast food employer, tipped employees and miscellaneous employee – in addition to the minimum salary level for exempt employees ($675 per week). Beginning on December 31, 2016, New York employers with multiple locations will have to comply with multiple minimum wages for miscellaneous employees based on employer size and work location, multiple fast food worker wages, multiple tipped employee wages, multiple minimum salary level wages, and others, all with built in scheduled increases every twelve months. These costs are on top of the administrative burden that the majority of New York businesses will be struggling with as they try to implement Paid Family Leave in 2017. The Business Council does not see how this type of regulatory environment is conducive to successful businesses continuing to provide good jobs and economic growth that support strong communities.
For these reasons, we urge the Department to reconsider the proposed rule and adopt a final rule that addresses these significant concerns.
Kenneth J. Pokalsky
The Business Council of New York State, Inc.