Challenging the New Overtime Rules

October 31, 2016

Author: Colin A. Walker

 

As most of us know, the Department of Labor has adopted new regulations under the Fair Labor Standards Act increasing the minimum salary for employees to be exempt from overtime pay from $23,660 to $47,476 per year.  Thereafter, the threshold will be automatically increased every three years.  The new rule is scheduled to go into effect on December 1 of this year.

Two lawsuits have been filed to challenge the new rule:

  • In the first lawsuit, 21 states argue that the rule violates the Tenth Amendment to the U.S. Constitution by impermissibly encroaching on the states’ authority to determine pay for public employees and exceeds the authority granted the Department of Labor by the Fair Labor Standards Act.
  • In the second lawsuit, a coalition of business organizations, including chambers of commerce, argue that the new rule violates the Administrative Procedure Act and is “arbitrary and capricious,” common arguments for challenging new regulations.   In essence, the argument is that the new regulations are not authorized by the Fair Labor Standards Act and do not comply with the procedural requirements for adopting new regulations.

These cases have been consolidated before the same federal judge in Texas and a motion for preliminary injunction has been filed.  This motion, if successful, would put the brakes on implementation of the new regulations until the judge rules on the case.  To do so, the plaintiffs must show a likelihood of success on the merits and immediate, irreparable harm.  This is no easy task, and many legal scholars believe that the lawsuits are unlikely to succeed.

Members of Congress have also attempted to delay or nullify the overtime regulations.  The U.S. House of representatives has passed a bill (H.R. 6094) to delay implementation of the new rule by 6 months.  The sponsors argue that, even if the rule is upheld, it is such a shock to employers, especially small businesses, that implementation should be delayed so that business have more time to adjust to it.  President Obama, however, has indicated that he will veto the bill and it appears that there are not enough votes to override his veto.  A Statement of Administration Policy states “While the bill seeks to delay implementation, the real goal is clear — delay and then deny overtime pay to workers.”

Three other bills have been proposed but not passed by either the House or the Senate.  H.R. 4773 would nullify the new regulations.  H.R. 5813 would require a gradual “phase-in” by incremental increases of the salary thresholds over the next three years.   S. 3464 also proposes a phase-in, but over a five-year period.  Again, the President is likely to veto these bills.

Bottom line: keep preparing for December 1…

Comments or inquiries may be directed to Colin Walker at cwalker@fwlaw.com.

This Article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.