The Labor Department should base increases in the minimum salary threshold used to determine overtime pay on the 20th percentile for salaried employees in the lowest paid geographic region of the country, according to Argentum President and CEO James Balda.

That methodology is what the department began using in 2004, he said.

Balda made the comments in a Sept. 22 letter written in response to a Labor Department request for information, published in the July 26 Federal Register, seeking input in advance of the department writing a new rule specifying the circumstances under which certain workers would be entitled to overtime pay.

An overtime rule finalized in May 2016 under President Barack Obama would have doubled the salary threshold — from $23,660 to $47,476 per year — under which most salaried workers would have been guaranteed overtime pay when they worked more than 40 hours per week. That threshold level was based on the 40th percentile of earning for full-time workers in the South, which at the time was the lowest-income Census region.

The rule was the subject of legal battles, including an injunction that prevented it from going into effect. June 30, the Labor Department under President Trump said it planned to develop its own rule rather than continue an effort to enact changes decided under the former administration. Aug. 31, a federal judge declared the Obama rule unlawful.

Less than 30% of operators had implemented 2016 rule

Balda said Argentum surveyed its members and found that less than 30% had implemented changes to comply with the increased salary threshold specified in the 2016 rule.

“The overwhelming majority of Argentum’s members did not comply until the last possible moment because of the significant burdens and costs of doing so, and the district court injunction relieved the employers of any such obligation,” he said.

Operators who had begun implementing the rule “encountered a range of adverse impacts, including increased costs, loss of flexibility and negative impacts on employee morale,” Balda said. “Based on this experience, the sizable majority of Argentum’s members remain concerned that any attempt to impose the 2016 rule, or anything like it, will have an adverse impact on the senior living industry and should not be adopted,” he added.

If the Obama administration’s final rule would have gone into effect, almost all supervisory positions at senior living communities in the deep South, parts of the Midwest and other rural states would have lost their exempt status, Balda said, “even though their job duties are substantially identical to similar positions held by exempt employees in New York and California.”

Using the 2004 methodology, Balda said, “provides the greatest degree of consistency with the statute and the district court’s decision in Nevada v. U.S. Dept. of Labor [which ultimately found the Obama rule unlawful]. The district court also indicated that adjusting the 2004 data for inflation would be consistent with the act, and Argentum has no objection to this alternative approach.”

Balda said Argentum also opposes the adoption of different standard salary levels based on census regions, size of employers, state, metropolitan statistical area, and it also opposes the imposition of different salary levels for executive, administrative and professional exemptions. Having multiple levels, Balda said, would burden employers and expose them to class action lawsuits if employees questioned a senior living operator’s application of the rule.

Argentum also opposes the return to pre-2004 methodologies and divisions between short and long job duties tests, Balda said. “In senior living communities, front line managers often perform supervisory and nonsupervisory duties concurrently, and such functions should not jeopardize their exempt status,” he wrote.

The salary level should remain a proxy for exempt job duties, Balda said.

Additional input that Argentum provided the Labor Department:

  • The department should not replace a salary level test with a duties-only test. “Senior living employers have over the decades found the salary test to be a useful tool to exclude obviously non-exempt employers from the exemption,” Balda said. “A different approach is more likely to create confusion and increase litigation with no attendant benefits.”
  • The department should allow employers to use all nondiscretionary compensation to meet any new salary levels for exempt status. The 2016 rule would have allowed bonuses and incentive payments to count only toward up to 10% of compensation in determining exempt status.
  • The “highly compensated employee” salary test should be kept at its current level. The 2016 rule would have raise the threshold from $100,000 to $134,004, but Argentum said “the previous salary of $100,000 was sufficient to ensure that only bona fide [executive, administrative, and professional] employees qualified for exempt status.”
  • The department should not impose automatic indexing of the salary level test. “Congress did not intend the salary level test to be indexed, as evidenced by the fact that Congress has never provided for automatic increases of the minimum wage or other exemptions to the [Fair Labor Standards Act],” Balda said. The 2016 rule called for the threshold to be updated automatically every three years to ensure that it was maintained at the 40th percentile of full-time salaried workers in the lowest income region of the country.

Argentum and other organizations representing senior living operators had opposed the Obama-era rule as being too big of a change. The American Health Care Association/National Center for Assisted Living, the American Seniors Housing Association and LeadingAge did not submit comments to the Trump Labor Department regarding a new rule.