On Sept. 20, 2016, Nevada and Texas led 21 states, including the Commonwealth of Kentucky, in filing a lawsuit to challenge the Department of Labor’s (DoL’s) new overtime rule changes set to go into effect Dec. 1 of this year. Right behind them, the U.S. Chamber of Commerce, National Automobile Dealers Association, National Association of Wholesaler Distributors and other groups filed their own appeal.
“The DoL went too far in the new overtime regulation,” said Randy Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber. “We’ve heard from our members, small businesses, nonprofits, and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done,” Johnson said in a press release. “Furthermore, the automatic escalator provision means that employers will have to go through their reclassification analysis every three years. In combination, the new overtime rule will result in salaried professional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work, and opportunities for career advancement.”
The Chamber Suit
- The Chamber suit charges that the rule departs from the intent established by Congress in the Fair Labor Standards Act (FLSA) 78 years ago in that:
- It sets an excessively high threshold for determining which positions qualify as executive, administrative, and professional.
- The DoL “ignored regional and industry differences that have been previously acknowledged,” which results in a one-size-fits-none salary threshold.
- The automatic triennial update “with no rulemaking or taking input from affected parties is not authorized by the Fair Labor Standards Act or any other relevant statute.”
The States’ Suit
The states’ suit notes:
- The new rule disregards the actual requirement of the FLSA by doubling the minimum salary threshold (from $23.660 to $47,476) that applies regardless whether an employee actually performs white-collar duties.
- The best first indicator of white-collar exempt status is if a person in the exempt position actually performs white-collar work, not whether the salary meets the minimum.
- The triennial salary increase based on the 40th percentile of the weekly earnings of full-time salaried workers in the lowest wage Census region. The increase “not only evades the statutory command to delimit the exception from ‘time to time,’ as well as the notice and comment requirements of the Administrative Procedure Act, it also ignores the DoL’s prior admissions [in President George W. Bush’s administration] that ‘nothing in the legislative or regulatory history…would support indexing or automatic increases.”
The new rule unconstitutionally requires states to pay overtime to state employees that are performing white-collar functions when the employees earn less than an amount to be determined by the executive branch of the federal government.
Lawsuits Can Fail
As heartening as these lawsuits may be to businesses, there is always the possibility that the lawsuits fail. Nearly since the rule was proposed, there have been experts who have predicted that the rule would be challenged in the courts.
But as Lawrence Mishel, Ph.D., economist and president of the Economic Policy Institute, a nonpartisan, Washington, D. C., think tank said in a recent interview by Society for Human Resource Management, “The DoL fulfilled all of their obligations during the rulemaking proceeding. They crossed every t and dotted every i. The final overtime pay rule update should be implemented as planned starting Dec. 1.”
With that in mind, don’t stop preparations for complying with the new overtime rule. The deadline for having everything in place will be here sooner rather than later.
Information provided by writer, Diane Faulkner, is not legal in nature. All reviews and opinions are submitted and based upon extensive research, experience in the human resources and labor relations fields and are not, in any way, legal opinions.