States, Business Groups Challenge Overtime Rule

A group of 21 states filed suit in the Eastern District of Texas Sept. 20 challenging the U.S. Department of Labor’s new rule governing which employees are eligible for overtime pay, arguing the agency unconstitutionally overstepped its authority to establish a federal minimum salary level for white collar workers.

The U.S. Chamber of Commerce and more than 50 other business groups filed a separate challenge to the rule in the same federal court in Sherman, Texas, just hours later.

The lawsuit filed by Nevada, Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah and Wisconsin argues that the rule is unconstitutional because it dictates wages states must pay employees for government functions.

Federal law requires an overtime exemption for bona fide executive, administrative or other professional employees.

Texas Attorney General Ken Paxton, who spearheaded the effort, said, “Once again, President Obama is trying to unilaterally rewrite the law. And this time it may lead to disastrous consequences for our economy.”

Paxton said the overtime rule more than doubles the salary threshold for a worker to be entitled to overtime without valid congressional authorization to do so. The rule will force many state and local governments as well as private businesses to substantially increase their employment costs, he said, forcing some to eliminate services or lay off employees.

In May 2016, the DOL doubled the minimum salary threshold that employees must earn in order to be exempt from overtime pay, increasing the figure to $47,476/year ($913/week), up from the previous salary of $23,660 ($455/week).  This number will be automatically updated every three years based on wage inflation.  The new rules do not change the so-called “duties test” applicable to employees who earn more than this salary threshold. The rule is slated to take effect Dec. 1. NATSO's analysis of the final rule and compliance guide can be found here. 

The Chamber’s lawsuit charges that by setting an excessively high salary threshold for determining who qualifies as “executive, administrative and professional employees,” the rule departs from the intent established by Congress in the Fair Labor Standards Act.  

The Chamber said DOL ignored regional and industry differences that have previously been acknowledged,  resulting in a “one size fits none” salary threshold and that the provision to automatically update the salary threshold every three years without a rulemaking or taking input from affected parties is not authorized by the Fair Labor Standards Act or any other relevant statute.

Joining the Chamber in the challenge are the Texas Association of Business, National Automobile Dealers Association, the National Association of Manufacturers, National Association of Wholesaler Distributors, National Federation of Independent Business and the National Retail Federation, among others.

NATSO continues to urge policymakers to repeal the new law, but the chances of President Obama signing such legislation are slim.

As such, NATSO supports the “Overtime Reform and Enhancement Act” introduced by Rep. Schrader that would phase in a new salary threshold incrementally.

“The Overtime Reform and Enhancement Act” would allow the threshold to rise to $35,984 this December. The remaining salary threshold increase would be phased in over the next three years. This approach could win bipartisan support and provide the basis for a compromise resolution.   

Tiffany Wlazlowski Neuman's photo

Tiffany Wlazlowski Neuman

Tiffany Wlazlowski Neuman develops and executes communications strategies to advance NATSO’s public relations and advocacy goals. Tiffany also develops and oversees partnerships related to the NATSO Foundation’s public outreach initiatives. Tiffany lives in the D.C. metro area with her husband and their two sons.More

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