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Press Release

AG Shapiro Urges U.S. Department of Labor to Withdraw Proposal That Would Decrease Employee Earnings

December 6, 2019 | Topic: Peoples AG

18 Attorneys General Argue Proposal Would Result in Longer Hours, Lower Pay

HARRISBURG – Attorney General Josh Shapiro and Illinois Attorney General Kwame Raoul today spearheaded a coalition of 18 Attorneys General in opposing a proposal by the U.S. Department of Labor to change the method employers use to calculate overtime, which would slash wages and eliminate jobs.

In a letter issued today, the coalition urged the Department of Labor to withdraw its proposed rule amending its regulation on the fluctuating workweek method of computing overtime. The coalition argues DOL’s proposal to arbitrarily expand the application of the fluctuating workweek method compromises worker safety, reduces workers’ compensation for overtime work, and makes it more difficult for employers to comply with fair labor laws.

“The Trump Administration has repeatedly targeted American workers by trying to strip them of their rights under federal and state labor laws,” Attorney General Shapiro said. “From proposals to give employers the ability to shirk the payment of overdue wages to reversing overtime protections for workers, I and many other state Attorneys General have stepped up to stop these changes.

“The proposal by the U.S. Department of Labor we are fighting today would, if approved, be another benefit to companies at the expense of workers in Pennsylvania and throughout the country. It would also violate labor laws. This cannot happen.”

Under the fluctuating workweek rule, employers can agree to pay a limited class of employees whose hours fluctuate from week to week a fixed salary for all hours worked. Rather than receiving an hourly wage, those employees’ regular rate of pay is calculated by dividing the employee’s fixed salary by their total hours worked. And rather than earning time-and-a-half for overtime, employers only need to pay those employees an additional half of their regular rate for each overtime hour worked.

The rule has long been held as being incompatible with instances in which employees receive additional pay like bonuses and shift differentials linked to the hours they work. The fluctuating workweek rule is the only rule under which workers’ hourly and overtime rates of pay actually decrease as the amount of hours they work per week increase. For that reason, some states use a modified fluctuating workweek method or apply it only in the narrow set of circumstances allowed under current law.

The Department of Labor’s proposal would expand the application of the fluctuating workweek to employees who receive any kind of additional pay, including pay incentives linked to employees’ hours worked, despite decades of legal precedent. In their letter, the coalition argues that expanding the use of the fluctuating workweek rule decreases an employee’s regular and overtime rate of pay the more the employee works. The coalition also argues that while the DOL claims the proposed rule will boost job creation, it actually creates incentives for employers to overwork employees instead of hiring additional staff. As employers reduce fixed salaries in lieu of paying employees premiums for working specific shifts, employees unable to work shifts offering premium pay will receive greatly reduced wages.

Additionally, the attorneys general point out that the DOL’s proposed rule undermines the Fair Labor Standards Act (FLSA), which was enacted in 1938 and ensures that employees are fairly compensated for working more than 40 hours per week. Instead of protecting workers from long hours and unfair compensation, the proposed rule threatens to expand the use of the only method for calculating overtime where the more the employee works, the less the employee is paid for each hour of overtime.

The proposed rule also runs counter to past court and department precedent. For decades, courts have held that employers may only use the fluctuating workweek rule when employees earn a fixed salary for all hours of work. In 2011, the DOL rejected a similar proposed rule because it would have the unintended consequence of allowing employers to pay a lower fixed salary and shift employees’ compensation into bonuses, resulting in wide pay disparities depending on the hours employees worked. Raoul and the attorneys general argue that, in light of this precedent, the DOL offers no evidence to justify its policy change.

Other Attorneys General participating in this letter are California, Colorado, Connecticut, Hawaii, Delaware, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, North Carolina, Oregon, Vermont, Washington, Washington D.C. and New York

The letter can be found here.

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