The Department of Labor’s new salary test for exempt employees goes into effect on December 1st. It will raise the salary level to qualify for certain white collar overtime exemptions. But will it be blocked now?
It might be if the two lawsuits filed in September 20 don’t delay or outright stop the rules from taking effect.
After making some changes to the rule, the Department of Labor (DOL) issued its final rule in May of this year. Although the proposed salary threshold decreased from the $970 per week (or $50,440 annualized) in the proposed rule, the doubling of the $455 per week minimum salary to $913 per week remained a point of concern for employers.
21 States and 50 Business Groups Join Forces
A group of 21 states filed a lawsuit in the United States District Court for the Eastern District of Texas challenging the Department of Labor’s new overtime labor law rule, which is set to take effect on December 1, 2016.
The group challenging the rule is led by Texas and Nevada, and includes the following states: Alabama, Arizona, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Utah, and Wisconsin.
The lawsuit names as Defendants the DOL and its Wage and Hour Division, Secretary of Labor Thomas Perez, and Wage and Hour Administrator David Weil, and Assistant Administrator for Policy Mary Ziegler.
In a separate suit in the same court, a collection of more than 50 business groups, including the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Retail Federation, National Automobile Dealers Association, and the National Federation of Independent Business, have filed a similar lawsuit.
The New Rules Unfair to Businesses
At the heart of the states’ claim is the contention that the new rule will force many businesses, as well as state and local governments, to unfairly and substantially increase their employment costs. For state governments in particular, the suit claims that the rule allegedly violates the Tenth Amendment by mandating how state employees are paid.
The states content that, by implementing the new rule, the federal executive branch will “wreck State budgets” and “commandeer, coerce, and subvert the States” by mandating the wages state employees are paid, what hours these employees will work, what compensation will be provided to employees working overtime, and the overall structure of payment at the State level.
The U.S. Chamber summarized their opposition to the impending overtime rule:
The DOL went too far in the new overtime regulation. We have 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.
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.
Businesses May Not Benefit From the State's Lawsuit Claims
Private employers and local governments may not benefit from the states’ claims that the new rule violates the Tenth Amendment. However, other arguments raised by the states could - in theory - result in the rule being blocked altogether.
But this is not likely as most legal observers are not placing much hope in the potential legal challenges to the new rules. Consequently, they continued to recommend that employers assume the new rules will take effect on December 1, 2016 as scheduled.
On September 21st, the day after the two lawsuits were filed, the U.S. House of Representatives introduced a bill to delay the coming regulations until June 1, 2017 and on September 28th, the House passed the bill moving to June 1, 2017 the effective date of the final rule set to double the salary threshold under which most salaried workers would be guaranteed overtime pay when they work more than 40 hours per week.
President Barack Obama, however, said he would veto the legislation if it also passes in the Senate and reaches his desk.
Looking for Professional Help With HR Compliance
An updated and streamlined reporting strategy will help your organization meet its obligations, while providing accuracy and timeliness. So take time to understand the new laws and prioritize accurate record keeping. In this way, you will make compliance a sure thing.
Another key step in maintaining HR compliance and increasing your company's cost-effectiveness is to consider outsourcing. A professional agency such a Accuchex can provide much-needed help with Human Resources needs and questions.
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