Third round of official comments on overtime rulemaking

Working Washington submitted the following comments to the Washington State Department of Labor & Industries as part of their official rulemaking process.

July 10, 2018

Re: Executive, Administrative, Professional (“EAP”) Overtime Rule ­ Scoping Questions Dear Director Sacks and Deputy Director Smith,

On behalf of our 100,000 members and supporters across the state, I wanted to thank you for the deep stakeholder engagement process the department has led, including in particular the comprehensive data review.

The issues raised in the stakeholder process and the data presented by the department point in the same direction as our conversations with workers across the state: Washington’s overtime rules are wildly out of date, and radically out of step with our economy. As a result, hundreds of thousands of salaried workers are being denied access to overtime pay — reducing their income, taking their time, distorting our economy, impacting health & productivity, and harming our communities.

We urge the department to take action to update overtime rules which reflects the following key elements:

The threshold for exemption from overtime should be calculated at three times the locally applicable minimum wage.

In the day-­to-­day reality of the workplace, the threshold for the overtime exemption is effectively the pay rate after which you can be made to work additional hours for no additional compensation. Since the threshold represents the minimum allowable “work for free” rate, there’s intuitive logic in tying it to the minimum wage, or the minimum allowable “work for pay” rate.

There are already multiple examples of jurisdictions setting their overtime­ exemption thresholds at or near three times the applicable minimum wage. For example:

  • The proposed federal overtime threshold which moved through U.S. Department of Labor rulemaking in 2016 set a level which was more than three times the federal minimum wage.

  • Washington State’s peak historic short test threshold of $250/week in 1975 was somewhat above three times the minimum wage at the time.

  • Pennsylvania recently released a proposal to update their state overtime threshold to a figure more than three times that state’s minimum wage

Other figures which have been raised for consideration during the scoping conversation are also close to this mark. For example, the state’s average weekly wage of $1190/week is about 2.5 times the state’s minimum wage, and the median salaried worker in the U.S. Western region is paid $1329/week, or a bit less than three times the current minimum wage.

We urge the Department to establish an overtime exemption threshold calculated at three times the locally applicable minimum wage, which is approximately where the threshold was when our economy saw the most widely shared prosperity. This is the simplest, most transparent, and most appropriate way to reflect actual conditions in the job market. Pegging the threshold to this mark will benefit workers, employers, and the economy by providing workers more money to contribute to the economy, more time to invest in their communities, increased opportunity, higher productivity, and benefits to workplace health & safety.

The threshold should update automatically.

Any calculation based on the minimum wage ought naturally to increase along with the minimum wage. This would ensure the overtime standard is predictable, consistent, and u ­to­ date, providing security and balance to workers and employers alike. With such an automatic self­-updating method, never again would our state allow the overtime threshold to fall decades behind wages and our economy.

The duties test should be clear, simple, and uniform.

Whether or not someone paid above the overtime threshold ought to be exempt from overtime pay should be clear and easily understandable by workers and employers, without need for subtle interpretation of administrative law or case­-by-­case adjudication. A single duties test would bring the most clarity; in order to further maximize clarity and simplicity, to the extent possible the criteria should be made uniform for executive, administrative, professional, outside sales, and computer professionals.

No reason has been offered to establish a separate exemption for so­c-alled “highly compensated employees”. Doing so would provide no real benefits, no additional clarity, and would simply create an additional point of complexity in a process which is otherwise pointing towards a single calculation and, as much as possible, a single duties test.

Rapid action will benefit workers & employers.

Our state’s overtime rules are literally decades behind our economy; the current state standard is long­-since obsolete and the current federal standard of $455/week is less than our state’s minimum wage, rendering it effectively nonexistent. Workers have been waiting long enough, and there is no good reason to wait even longer for federal action which may or may not take place over the next several years. Further, there is no reason to believe an updated federal rule would be any more relevant to the economy and wage market of our state than is the federal $7.25/hour minimum wage.

If the department establishes an overtime threshold calculated as a multiple of minimum wage, setting an effective date of January 1, 2019 provides an automatic two­-step phase-­in, as the minimum wage is also in the midst of its own phase-­in as a result of Initiative 1433. Further, while some may claim that any increase to a threshold reflective of our contemporary economy will appear to be a large leap from current decades­-old state rules, the reality is less dramatic. Responsible employers have long since updated their pay structures to reflect federal action which was pending in 2016, so many of the adjustments which employers may want to pursue will be largely duplicative of adjustments previously planned and even carried out.

In conclusion, we urge the Department to move quickly to update the threshold for overtime exemption to three times the locally applicable minimum wage, while clarifying and simplifying the duties test. This multiple is well within the historic range, though appropriately at the high end of this range. And it reflects the reality that employers indicate a worker’s “bona fide” Executive, Administrative, or Professional status by the amount of money on a their paycheck, not simply by adding the word “manager” to their title or paying them the same fixed salary each pay period.

Updated overtime rules will benefit the whole state by ensuring that instead of working effectively unlimited hours, effectively for free, hundreds of thousands of underpaid salaried workers will see the benefits of more money in their paychecks and more time in their communities.

Thank you for taking the concerns of workers into account as you consider this important issue. We look forward to engaging our members in the process as rulemaking continues.