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NRF to Labor Department: salary level recommended under a proposal to expand overtime is too high

WASHINGTON, 2015-9-4 — /EPR Retail News/ — The National Retail Federation today told the Labor Department that the salary level recommended under a proposal to expand overtime is too high, and asked officials to use previous methodology that would result in a lower figure. NRF also said plans to automatically increase the number each year without review should be rejected, and that businesses should be given at least a year to comply once new regulations take effect.

“NRF strongly opposes the Department of Labor’s proposed changes,” NRF President and CEO Matthew Shay said. “Attempting to raise employee wages by fiat ignores economic reality and would end up having major negative consequences for employees, employers and the economy as a whole.”

“As hourly workers, many of the affected employees would receive reduced compensation and benefits and be diverted from career opportunities that are a path to middle-class success,” Shay said. “Not surprisingly, NRF’s research reveals that retail managers largely oppose DOL’s proposed changes.”

“Many employees view being classified as exempt as a badge of professional status,” Shay said. “Being reclassified would be seen by many as a step back in their careers and as a devaluation of their roles in the organization.”

Shay’s comments came in a letter sent to DOL ahead of Friday’s deadline for business groups to respond to the proposal.

Under DOL’s plan, most individuals making up to $970 a week would automatically receive overtime pay at time-and-a-half when working more than 40 hours a week, up from the current $455 set in 2004.

Shay said that amount – $50,440 a year – would cover two-thirds of salaried retail workers and would be “simply too high a level for the low-margin retail industry to bear without severe repercussions.”

The Labor Department chose $970 under a formula intended to give overtime to the lowest-paid 40 percent of all full-time workers nationwide who currently receive a fixed salary. But Shay said 40 percent “is completely arbitrary, lacks transparency and is completely lacking in foundation.” Instead, he said DOL should use the same methodology used in 2004, when the $455 level was based on the lowest-paid 20 percent of salaried workers in the south rather than nationwide and in the retail industry rather than all industries.

Shay said cost-of-living differences mean that setting the level at $970 would provide overtime to more than 45 percent of currently salaried workers in 10 states and more than 50 percent in eight more states – more than double the percentage who now receive overtime.

Shay asked DOL to reject a provision of the proposal that would automatically increase the salary level each year, saying past policy of updating it only when needed “has worked well and there is no need to break with this practice.”

Under federal law, managers and professionals who make more than the salary level can be declared exempt from overtime if they meet certain job duties tests such as having supervision of other workers as their primary duty. The current DOL proposal stops short of suggesting changes in the duties tests, but asks whether such changes should be made. Shay urged DOL not to do so, saying any changes would upset standards settled on since 2004 and “fuel unnecessary and costly litigation.”

A study conducted for NRF by research firm Oxford Economics found that fully implementing the overtime proposal could cost retailers and restaurants alone $8.4 billion a year in added wages. But the study said many employers would offset most of the cost by reducing hours or benefits or using more part-time workers. Nonetheless, employers would see an estimated $745 million in added administrative costs even if workers saw no increase in take-home pay.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation.


J. Craig Shearman

(202) 626-8134
(855) NRF-Press

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