March 18, Dear Sir or Madame:

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1 March 18, 2016 The Office of Information and Regulatory Affairs The Office of Management and Budget th Street, NW Washington, DC Re: RIN 1235-AA11, Notice of Proposed Rulemaking; Defining and Delimiting the Exemption for Executive, Administrative, Professional, Outside Sales, and Computer Employees Dear Sir or Madame: As organizations representing various segments of the cleaning industry, we would like to share our concerns about the costs and burdens to small businesses that will result from the Department of Labor s proposed rule on Defining and Delimiting the Exemption for Executive, Administrative, Professional, Outside Sales, and Computer Employees. The proposed rule is inflexible and fails to fully consider the significant negative impact on businesses, workers and the national economy. These comments are submitted on behalf of ISSA The Worldwide Cleaning Industry Association (ISSA), the Building Service Contractors Association International (BSCAI), the Association of Residential Cleaning Services International (ARCSI), and the National Service Alliance LLC (NSA). ISSA is a non-profit trade association that represents the commercial cleaning industry. ISSA represents over 7,000 member companies that include every segment of the cleaning industry: manufacturers and distributors of janitorial supplies and products, as well as providers of cleaning services. BSCAI represents a worldwide network of more than 1,000 member companies employing over 100,000 workers in the United States who provide cleaning, facility maintenance, security, landscaping and other related services to building owners and managers. The association provides contractor-specific education, certifications, publications, industry data and networking opportunities for leaders in the building service industry. ARCSI is the world-wide not-for-profit trade association representing the residential cleaning industry with over 600 member cleaning companies across the United States with over 5,000 employees. NSA is a Group Purchasing Organization that focusing on providing building service companies the benefit of combined purchasing power and innovative technology to help companies stay profitable and competitive in today s challenging marketplace. 1

2 We are dismayed that DOL has proposed increasing the minimum salary to qualify as an exempt employee from the current $455 per week (or $23,660 per year) to $970 per week ($50,440 per year) next year; an unprecedented increase of over 100%. Such a massive increase will negatively impact businesses and their employees at a time when industry is confronted with numerous other rising cost factors such as increasing wage pressures and increased compliance costs with a host of new regulations that range from environmental and labor policies to insurance mandates. We are particularly concerned that the proposal: Will result in layoffs and other significant financial harm to businesses; Will result in unemployment and/or a loss of employee benefits and flexibility; Does not take into account regional differences in labor markets and the cost of living; Would implement automatic annual updates that do not appropriately account for significant fluctuations in the economy; Suggests that DOL intends to change the primary duties test without an opportunity for the public to comment on a specific and transparent regulatory proposal. Negative Impacts on Businesses and Their Employees Through surveys and conversations, our members chronicled the negative impacts of the proposed rule on their businesses. Some of the prevalent comments include the following: This proposed rule, combined with recent state increases in minimum wages and other new regulatory compliance costs, will force businesses to lay off employees or decrease their pay. Many managers and supervisors would lose the schedule flexibility that they currently enjoy if they are forced to rigidly catalogue their hours worked each week; Any increases in exempt status levels should be phased-in over time because businesses cannot absorb the very real and significant costs if they are to be implemented in one fell swoop. The concerns about costs are not just complaints but very real impacts. Our members, many of whom are small businesses with low profit margins, have estimated the impacts by looking at which employees would be re-classified. They chronicled costs ranging from about $100,000 to well over $750,000 annually depending on the size of the company and the number of employees. Small businesses cannot absorb these costs without either reducing their workforce or 2

3 reducing wage rates. For larger businesses, especially those that offer cleaning services, the economic impact will be more substantial. Negative Impacts on Employees As mentioned above, DOL s proposal is likely to result in employees being laid off in large numbers. For those employees who are not laid off, we can expect employers to offset the costs imposed by the DOL proposal by cutting or reducing benefits or flexibility in scheduling. While hourly pay and nonexempt status is appropriate for certain jobs, it is not appropriate for all jobs; otherwise Congress would not have created any exemptions to the overtime pay requirements. Many employees classified or reclassified as hourly, nonexempt workers, will lose benefits associated with exempt status. Employers must closely track nonexempt employees hours to ensure compliance with overtime pay and other requirements. As a result, nonexempt employees often have less workplace autonomy and fewer opportunities for flexible work arrangements, career training and advancement than their exempt counterparts. For example, in many workplaces, nonexempt employees are not permitted to telecommute or to work flextime schedules that are made available to exempt employees because of the challenges in tracking and capturing all compensable work hours and controlling overtime costs for nonexempt employees. As a result of conversion to nonexempt status, some currently exempt employees may lose the flexible work arrangements on which they and their families have come to rely. In addition, the FLSA s rigid rules with respect to overtime pay also make it complicated for employers to provide hourly employees with certain incentive pay and bonuses. Failure to Address Regional Cost Differences DOL s proposed salary threshold does not account for regional differences in wages and cost of living. Salaries and living costs are significantly higher in major metropolitan areas than in more rural parts of the country. DOL s one-size-fits-all approach to wage levels fails to account for this diversity. DOL s proposed salary threshold is higher than minimums set under any state laws more than $10,000 higher than California and more than $15,000 higher than New York, two of the states with the highest costs of living and the highest salary thresholds. The dramatic increase proposed by DOL will fall disproportionately on workers in cities and states with lower costs of living. For example, white collar workers in West Virginia, Nebraska, Oklahoma and Kentucky may be classified as hourly even though they do the same work as employees classified as exempt in New York and California because of regional differences in pay, which are reflective of regional differences in cost of living. 3

4 Annual Increases are Not Appropriate DOL notes in the proposal that it plans to increase the minimum salary threshold annually by tying it to either the Consumer Price Index for All Urban Consumers or the 40th percentile of weekly earnings of fulltime salaried employees. Employers would be given only 60-days notice to adjust to the annual increases, which is too short of a time-frame for businesses to plan. Compliance with these updates will require time-consuming annual reviews of compensation, potential bonuses, and classification of employees. As the annual increases take effect, the number of employees faced with the threat of reclassification to hourly status will continue to grow. Congress did not intend for the law to include automatic annual updates. Instead, Congress ordered the Department to update the exemptions from time to time, to take into account changes to the economy. From 1938 to 1975, DOL regularly updated the salary level every five to nine years. During this time, it made various adjustments to salary levels, often imposing different salary requirements for executives, professionals and administrative employees. From 1975 to 2004 the salary level was not updated likely because of complications in applying outdated provisions of the regulations to modern white collar employees, and in 2004, DOL remedied this by modernizing the duties test. Presumably since 2004, the current administration did not update the salary level within the historic five-to-nine-year time frame because of the great recession and the associated prolonged and difficult recovery. This decision was a wise course of action and argues against any automatic updates, which could exacerbate future recessions. DOL needs to fulfill its duty and regularly update the threshold through notice-and-comment rulemaking, as it has with every salary increase. DOL can meet this requirement without the rigid and costly automatic updates that it proposed. Proposed Changes to Current Primary Duties Test Must Be Transparent Finally, DOL has asked for public comment on the current primary duties test. In the proposal, DOL mentions that it is considering significant changes to the duties test that could result in employers having to monitor and track if and how often exempt employees are performing non-managerial, or nonexempt work. However, the proposal fails to set forth a specific and transparent proposal, making it impractical if not impossible for the business community to properly evaluate and provide constructive comments on the impact of such contemplated revisions. For this reason, any proposed changes to the primary duties test should be clearly spelled out and proposed for public comment before being finalized. Failure to solicit public comment on specific changes to the duties test would violate the spirit of the Administrative Procedure Act, and potentially the letter of the law. It would also contradict the Administration s promise to increase transparency in the rulemaking process. 4

5 Conclusion In conclusion, we believe that DOL s proposal is misguided. It is inflexible and fails to fully consider the significant negative impact on businesses, workers and the national economy. Sincerely, William C. Balek Director of Legislative & Environmental Services ISSA Christopher Mundschenk Executive Vice President BSCAI Terry Sambrowski Executive Director NSA Ernie Hartong CEO ARCSI 5