BEFORE THE DEPARTMENT OF LABOR AND INDUSTRY
STATE OF MONTANA
In the matter of the adoption of NEW RULE I, and the repeal of ARM 24.16.201, 24.16.202, 24.16.203, 24.16.204, 24.16.205, and 24.16.206, regarding employment of persons in an executive, administrative, or professional capacity
NOTICE OF ADOPTION AND REPEAL
TO: All Concerned Persons
1. On March 11, 2010, the Department of Labor and Industry (department) published MAR Notice No. 24-16-241 regarding the proposed adoption and repeal of the above-stated rules at page 594 of the 2010 Montana Administrative Register, Issue Number 5.
3. The department has thoroughly considered the comments and testimony received. A summary of the comments received and the department's responses are as follows:
Comment 1: Three commenters, including one speaking on behalf of the Governor's administration, stated their support for the proposed new rule.
Response 1: The department acknowledges the commenter's support.
Comment 2: Several other commenters expressed general support for the proposed new rule and proposed repeals, but opposed setting the weekly salary threshold at a level higher than what is provided under the federal regulations ($455 per week).
Response 2: The department acknowledges the commenter's support for portions of the proposed new rule.
Comment 3: A commenter opposed the proposed weekly salary threshold of Montana's statewide average weekly wage and noted that although Montana has one of the lowest average incomes in the nation, the proposed salary threshold would be the second highest in the country. The commenter also noted that Montana would become one of only five states that have established a weekly salary threshold higher than the federal level, and provided data to support that statement.
Response 3: The department acknowledges the commenter's data supports his position. In light of all of the comments received, the department has amended NEW RULE I (24.16.211) to delete Montana's average weekly wage as the weekly salary threshold, and will incorporate by reference the federal threshold of $455 per week.
Comment 4: Several commenters stated that in their experience, businesses have greater worker productivity by paying relatively low weekly salaries, but with larger incentive payments than with higher weekly salaries and lower incentives. The commenters objected to the proposal to raise the weekly salary threshold to the state's average weekly wage, and claimed that it would prevent employers from using incentive pay as a tool to increase productivity.
Response 4: The department acknowledges the comments, and will not be adopting the state's average weekly wage as the weekly salary threshold.
Comment 5: Several commenters stated that setting the weekly salary threshold at a level higher than what is provided under the federal regulations would effectively remove the ability of an employer to provide incentive pay for exempt managers and sales staff. Some commenters stated that if Montana used a higher salary threshold, employers with multi-state operations would have problems providing equitable compensation for comparable positions within the company, and that it would be a disincentive for continued Montana operations. Other commenters stated that if Montana adopted the state's average weekly wage as the weekly salary threshold, some employers would end up laying off a portion of its workforce or reducing the hours of work available for their employees. The commenters generally characterized the proposed weekly salary threshold as an effort to force employers to pay higher salaries than employers believed were appropriate.
Response 5: The department respectfully disagrees with the commenter's conclusion that employers would have been forced to pay higher salaries. Employers would still have had the discretion about whether to pay employees on a salary basis (which would potentially exempt those employees from the minimum wage and overtime provisions of law) or to pay employees on a basis that conforms to the minimum wage and overtime requirements of existing law. However, the department acknowledges that the issue of "incentive pay" does not easily integrate into the traditional salary basis analysis. The department considered amending the proposed new rule to provide for a methodology that would take incentive pay into account for the salary basis test, but has concluded that there are too many questions and details about how that would work to adopt the rule changes in a reasonable time. The department has concluded that in light of all of the comments it received, it will not adopt a weekly salary threshold level that is greater than the federal level.
Comment 6: Some commenters noted that all of the persons speaking as proponents at the public hearing were employees of government entities.
Response 6: The department considers the substantive merits of the data, arguments and view of persons commenting on rules without discriminating for or against a speaker because of the speaker's affiliation with a particular employer, organization, or interest group. The department does not accept that it should discount or devalue the comments of a person simply based upon the person's occupation or employment status.
Comment 7: A commenter stated that if the higher salary threshold was adopted, his business would be forced to hire college graduates for exempt management positions instead of hiring inexperienced non-college graduates and train those workers himself.
Response 7: The department notes that nothing in the proposed rule requires that an exempt manager have a given level of formal education or training, and individual businesses remain free to make the hiring decisions that management believes to be in the best interests of the business.
Comment 8: A commenter noted that in 1991 Montana exempted from overtime certain outside sales personnel involved in the sales of office supplies, computers and equipment, and urged that Montana's labor laws mirror federal regulations.
Response 8: The department's ability to adopt rules is limited by its legislative authority. Outside sales are covered by the federal regulations being incorporated by reference. As noted above, the department is removing the higher weekly salary threshold from the rule.
Comment 9: A commenter suggested that if the department believes that the weekly salary threshold should be set at the state's average weekly wage, the department should propose legislation to that effect, rather than adopting it via rule.
Response 9: The department has decided not to adopt in this rulemaking project the state's average weekly wage as the weekly salary threshold. The department will consider the commenter's suggestion of using the legislative process instead of rulemaking should it decide to propose a higher weekly salary threshold at some point in the future.
Comment 10: Commenters asked on what date the department announces the state's average weekly wage, and how that information is disseminated.
Response 10: The state's average weekly wage is calculated annually by the department on a calendar year basis, by not later than May 31 (and typically a week or so before the end of May). Dissemination of the state's average weekly wage is via department web site posting and via e-mail to interested persons. If the state's average weekly wage had been selected as the salary threshold amount (which it is not), press releases would also have announced the calculation, similar to the way in which the department announces changes to the state minimum wage.
Comment 11: A commenter suggested that the department provide an economic analysis of the impact on small businesses of adopting a weekly salary threshold higher than that established by federal regulation. The commenter noted that an economic analysis of the effect on small businesses is required under federal rulemaking, but not for Montana rulemaking.
Response 11: Because the department is not adopting a higher weekly salary threshold than currently provided under federal regulation, there is no adverse economic impact to small employers due to the department's adoption of the rule. The department notes that for federal rulemaking purposes, a "small employer" is one that has less than 500 employees. The department believes that it would be an inefficient use of agency resources to provide an after-the-fact economic analysis of a proposal that is not being adopted.
4. Having considered the comments received, the department has adopted the following rule as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:
NEW RULE I (24.16.211) EXECUTIVE, ADMINISTRATIVE, AND PROFESSIONAL EMPLOYEES (1) and (2) remain the same.
(3) The following federal regulations are adopted by reference:
(a) 29 CFR part 541, subpart A, as in effect on July 1, 2009.
(b) 29 CFR part 541, subpart B, as in effect on July 1, 2009
, except the dollar threshold amount in 29 CFR 541.100(a)(1) is changed to the amount specified in (5).
(c) 29 CFR part 541, subpart C, as in effect on July 1, 2009
, except the dollar threshold amount in 29 CFR 541.200(a)(1) is changed to the amount specified in (5).
(d) 29 CFR part 541, subpart D, as in effect on July 1, 2009
, except the dollar threshold amount in 29 CFR 541.300(a)(1) is changed to the amount specified in (5).
(e) 29 CFR part 541, subpart F, as in effect on July 1, 2003.
(f) 29 CFR part 541, subpart G, as in effect on July 1, 2009
(i) the dollar threshold amount in 29 CFR 541.600(a) is changed to the amount specified in (5);
(ii) the amounts in 29 CFR 541.600(b) are adjusted to a comparable amount based on a minimum weekly salary of the amount specified in (5); and
(iii) the dollar threshold amount in 24 CFR 541.601(b) is changed to the amount specified in (5).
(g) 29 CFR part 541, subpart H, as in effect on July 1, 2009.
(4) remains the same.
(5) The dollar threshold amount to be used in each rule is a weekly salary rate equal to the state's average weekly wage, as established annually by the department.
(6) remains the same, but is renumbered as (5).
AUTH: 39-3-403, MCA
IMP: 39-3-401, 39-3-406, 39-3-408, MCA
5. The department has repealed the following rules as proposed:
24.16.204 EMPLOYEE EMPLOYED IN A BONA FIDE EXECUTIVE CAPACITY
24.16.205 EMPLOYEE EMPLOYED IN A BONA FIDE ADMINISTRATIVE CAPACITY
24.16.206 EMPLOYEE EMPLOYED IN A BONA FIDE PROFESSIONAL CAPACITY
6. The rule changes identified in this notice are effective May 14, 2010.
/s/ MARK CADWALLADER /s/ KEITH KELLY
Mark Cadwallader Keith Kelly, Commissioner
Alternate Rule Reviewer DEPARTMENT OF LABOR AND INDUSTRY
Certified to the Secretary of State May 3, 2010