Average annualized direct costs will be $802.9 million with updating and $615.6 million without updating. Average annualized transfers with a 7 percent real discount rate will be $1.5 billion with updating and $990 million without updating. For Type 3 workers and Type 2B workers (the 50 percent of Type 2 workers who regularly work occasional overtime, an estimated 969,100 workers), the Department used the incomplete fixed-job model to estimate changes in the regular rate of pay. However, because these workers will receive a 50 percent premium on their regular hourly wage for each hour worked in excess of 40 hours per week, their average weekly earnings will increase. The reduction in hours is relatively small and is due to a decrease in labor demand from the increase in the average hourly wage as predicted by the incomplete fixed-job model (Table 15).

Table 29—Number of Affected Workers Employed by Small Entities, by Industry and Employer Type

The Department expects that this rule could lead to multiple benefits, which were discussed qualitatively in the NPRM. The Department is finalizing § 541.5, Severability, as proposed, with that addition of clarifying language as discussed below. In 2002, five years after he left the White House, Stiglitz published “Globalization and Its Discontents,” which was highly critical of the International Monetary Fund, a multilateral lending agency based in Washington. The book’s success—and the Nobel—turned him into a public figure, and, over the years, he followed it up with further titles on the global financial crisis, inequality, the cost of the war in Iraq, and other subjects. As a vocal member of the progressive wing of the Democratic Party, Stiglitz has expressed support for tighter financial regulations, international debt relief, the Green New Deal, and hefty taxes on very high incomes and large agglomerations of wealth. One can only be dismissed from an Oxford House because of drinking, using drugs, non-payment of rent, or disruptive behavior.

Figure 4—Flow Chart of the Rule’s Effect on Earnings and Hours Worked

A majority of the commenters opposing the updating mechanism challenged the Department’s authority to adopt such a provision. Most commenters that supported the updating mechanism did not specifically discuss the Department’s authority to institute such a mechanism. As to commenters supporting the proposed triennial updating mechanism that addressed the issue, they supported the Department’s authority. The Department is sensitive to commenter concerns about the potential impact of this rulemaking on affected employers.

Table 27—Comparison of Projected Costs and Transfers With and Without Updating

Second, the new salary level will result in overtime protections for an additional 2.2 million currently exempt workers who meet the standard duties test and earn between the long test salary level ($942 per week) and the final salary level. As explained earlier, the Department is setting the standard salary level above the long test level to account for the shift to a one-test system in a manner that reasonably distributes the impact of this switch. The final rule will limit the number of affected workers by setting a standard salary level below the midpoint between the long and short test salary levels and by using earnings data from the lowest-wage Census Region (the South).

• 2d 1 (D.D.C. 1999), two landlords who rented their homes to people with disabilities were denied standard landlord insurance and were directed to purchase costlier commercial insurance policies.
• Because the Department cannot predict employers’ precise reactions to the rule, the Department calculated bounds on the size of the estimated transfers from employers to workers, relative to the primary estimates in this RIA.
• The Department’s new standard salary level will, in combination with the standard duties test, better define and delimit which employees are employed in a bona fide EAP capacity in a one-test system.
• In updating years, costs will increase due to newly affected workers and some regulatory familiarization costs.

Table 31—Overview of Parameters Used for Costs to Small Businesses and the Impacts on Small Businesses

As a result, the shift from a two-test to a one-test system significantly broadened the EAP exemption because employees who historically had not been considered bona fide EAP employees were now defined as falling within the exemption and would not be eligible for overtime compensation. This broadening specifically impacted lower-paid, salaried white-collar employees who earned between the long and short test salary levels and performed substantial amounts of nonexempt work. Under the two-test system, these employees had been entitled to overtime compensation if their nonexempt duties exceeded the long test’s strict 20 percent limit on such work. Under the 2004 standard test, these employees became exempt because they met both the low standard salary level and the less rigorous standard duties test, which does not have a numerical limit on the amount of nonexempt work. Despite the inability to incorporate these survey results into the analysis, select results are presented here.

The Department sought comments on whether the date for the first automatic update should be adjusted if it were to make an initial adjustment to any of the compensation levels. (ii) No later than the effective date of the updated earnings requirements, the Wage and Hour Division will publish on its website the updated amounts for employees paid pursuant to this part. As the Department stated in the IRFA, it is difficult to directly evaluate compliance cost impacts by entity size due to lack of data concerning the distribution of affected workers by entity size. Therefore, many small entities will employ zero affected workers; small entities that do employ affected workers may employ one affected worker, or have nearly all workers affected, and anywhere in between. The number of small entities that employ affected workers will be inversely related to the number of affected employees per entity; if small entities only employ one affected worker, more entities will be affected, and vice versa. The Department used a time estimate per affected worker, rather than per establishment, because the distribution of affected workers across establishments is unknown.

Table 2—Summary of Affected Workers, Regulatory Costs, and Transfers—Standard and HCE Salary Levels

Table 34 presents estimated first year direct costs and payroll increases combined per entity and the costs and payroll increases as a percent of average entity payroll. The Department presents only the results for the upper bound scenario where all workers employed by the entity are affected. Combined costs and payroll increases per establishment range from $1,800 in insurance to $57,200 in hospitals. Combined costs and payroll oxford house traditions increases compose more than two percent of average annual payroll in one sector, food services and drinking places (3.6 percent). Compare workers’ predicted earnings to the predicted salary and compensation levels to estimate affected workers. The Department estimated that in Year 1, 4.3 million EAP workers will be affected, with about 292,900 of these attributable to the revised HCE compensation level (Table 26).

Figure 10—10-Year Projected Number of Affected Workers in Small Entities, and Associated Costs and Payroll Increases

Commenters asserted that this may cause growth in the 35th percentile of full-time salaried workers to no longer reflect prevailing economic conditions. The Department believes it has chosen the most effective option that updates and clarifies the rule and results in the least burden. Among the options considered by the Department, the least restrictive option was using the 2004 methodology (the 20th percentile of weekly earnings of full-time nonhourly workers in the lowest-wage Census region, currently the South, and in retail nationally) to set the standard salary level, which was also the methodology used in the 2019 rule. As noted above, however, the salary level produced by the 2004 methodology is below the long test salary level, which the Department considers to be a key parameter for determining an appropriate salary level in a one-test system using the current standard duties test. Using the 2004 methodology thus does not address the Department’s concerns discussed above under Objectives of, and Need for, the Rule. As previously explained, the Department believes the updating mechanism adopted by this final rule will ensure greater certainty and predictability for the regulated community.

Table 11—Minimum Wage Only: Mean Hourly Wages, Usual Weekly Hours and Weekly Earnings for Affected EAP Workers, Year 1

The assumptions small businesses used to estimate first-year compliance costs ranging from $20,000 to $200,000 per entity were not described. However, the Department clearly outlined its methodology and assumptions used to estimate regulatory familiarization, adjustment, and management costs that it expects businesses, including small businesses, might incur. First, this rulemaking is narrow in scope as it only makes changes relating to earnings thresholds in the part 541 regulations. The Department therefore expects that most businesses will not require significant time to become familiar with these regulations, or that they will require significant time from outside consultants.