Thursday, September 29, 2016

States and Business Organizations Seek to Stop New Overtime Rules

Employers by now are aware that the Department of Labor rules about overtime are scheduled to change in just over two months, on December 1, 2016. Now, two separate groups , one consisting of 21 states and the other consisting of a group of business organizations,  have filed suit in a Texas court to stop that change.

As employers know, the change in the overtime rules will affect who will be eligible for what is commonly referred to as white collar exemptions (bona fide executive, administrative, or professional positions).  While the rules do not change the duties test for these exemptions, as of December 1st, employers must pay a minimum salary of $47,746 to employees to meet the exemption, with an automatic increase of the minimum salary tied to cost of living.

The suits attack the impact of new rule in general and also focus on the automatic increase provision. The states’ claim that the new rule will force many businesses, including state and local governments, to unfairly and substantially increase their employment costs. For state governments in particular, the rule allegedly violates the Tenth Amendment by mandating how state employees are paid.  The states challenge the automatic increases in the salary threshold every three years, claiming that it ignores the intent of Congress that the employee’s duties are the distinguishing factor between exempt and non-exempt employees, not salary levels and violates the Department’s duty under the Administrative Procedure Act to engage in “notice-and-comment” rulemaking every time it alters FLSA guidelines.

Most experts believe that the states will not prevail in this action, with the possible exception to the claims regarding the automatic increase component. While both suits seek a preliminary injunction to the rule implementation, employers should continue to prepare for the changes