Projections Are Only As Good As the Data on Which They Are Based

The Department of Labor’s (DOL’s) NPRM provides estimates of the number of employees affected by the proposed salary test level increases, but projections are only as good as the data on which they are based.  In fact, there is no data currently collected that would enable an accurate and reliable estimate of the number of employees who are subject to the FLSA or how many employees are classified as exempt, much less an estimate of those that would be impacted by the proposed changes. 

The NPRM relies on the Bureau of Labor Statistics’ (BLS) household survey that is used to calculate the unemployment rate and labor force participation rate each month.[1]  One quarter of the respondents to this survey are asked whether they are paid by the hour and the amount of their typical earnings per week.  The NPRM uses these responses as an indicator of whether an individual is paid a salary.  However, non-hourly pay includes more than just salaried employees, most commonly those paid on commissions or a piece rate. Other than weekly earnings and occupation codes, there is nothing in the BLS household survey indicating whether a respondent may or may not be classified as exempt from the FLSA.

The DOL acknowledges in footnote 3 of the NPRM that it “considers data representing compensation paid to nonhourly workers to be an appropriate proxy for compensation paid to salaried workers.”  Use of a proxy is necessary because the DOL did not gather reliable information from employer surveys on this topic for either the current NPRM, or the NPRMs and Final Rules from 2015-2019.  The DOL has also not gathered updated information about the likelihood that employees in different occupations and salary ranges would pass the duties test and instead continues to rely on dated information from a 1999 GAO investigation.

The NPRM proposes changes that will fundamentally transform the FLSA, by making the salary level test the predominant factor in determining whether millions of workers are exempt from the FLSA.  The NPRM also increases the relative importance of the salary level test every three years, as millions of white-collar workers are re-classified as hourly employees.  The DOL cannot accurately project the full impact of these substantial changes because it has not collected reliable data measuring the number and compensation of exempt and non-exempt white-collar workers, or the likelihood that workers in different white-collar jobs would pass the duties test.      

[1] The survey is limited to one respondent per household who provides employment information for all adults in the household.