The Employer's Legal Resource: Challenges to Overtime Rules Pending — But December 1 Compliance Deadline Still in Effect For Now
As we alerted you in our June newsletter, the Department of Labor has issued final regulations updating the minimum salary threshold for employees to qualify for most of the "white collar" overtime exemptions from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). Employers must be in compliance by the slated deadline of December 1, 2016.
Not surprisingly, some are not thrilled about the changes. Several challenges are currently pending, including administrative appeals to the DOL, federal lawsuits, and proposed legislation.
The National Federation of Independent Business (NFIB) has formally requested that the DOL postpone implementation of the updated rule until June 1, 2017. The NFIB urges that such a delay is necessary in in order to give small employers – many of which lack the legal, financial, and personnel resources to effectively analyze the updated regulations within the deadline currently permitted – time to reorganize their workforce and implement new systems for tracking hours, recordkeeping, and reporting. The NFIB also supports legislation to repeal the DOL's updated regulations altogether.
Like the NFIB's appeal to the DOL, committee legislation has been introduced in the House of Representatives that would delay the rule's effective date by six months, until June 1, 2017. According to the proposed Regulatory Relief for Small Businesses, Schools, and Nonprofits Act, without congressional action "drastic changes to federal overtime policies will take effect, resulting in harmful consequences for workers, small businesses, nonprofit organizations, and colleges and universities." The pending legislation highlights the impact on small businesses, nonprofits, and colleges and universities, and alleges that the DOL's final rule will stifle workplace flexibility, limit opportunities to climb the economic ladder, create new hurdles for small businesses, hurt college students and young adults beginning their careers, and jeopardizes the ability of nonprofits to deliver important services.
Additionally, a coalition of 21 states (including Oklahoma) have joined in a lawsuit filed in Texas challenging the final regulation. The lawsuit alleges that the DOL's emphasis on the salary test effectively disregards the existing job duty requirements and is contrary to the statutory text of the exemption, Congressional intent, and common sense. (We reviewed those job duty requirements in our July ELR.) The states also challenge the rule's automatic updating mechanism, which they claim "ratchet[s]-up the salary level every three years without regard for current economic conditions or the effect on public and private resources." The lawsuit further alleges that the final rule "forc[es] many state and local governments to shift resources from other important priorities to increased payroll for certain employees, [and] effectively impose[s] the federal executive's policy wishes on state and local governments," thereby exceeding constitutional authority and threatening the sovereignty of states. The states are seeking preliminary and permanent injunctive relief to prevent the final rules from being implemented, applied, or enforced, and to set them aside as actions "in excess of statutory jurisdiction, authority, or limitations." The U.S. Chamber of Commerce and a coalition of businesses also filed a similar lawsuit.
Despite these challenges, the current December 1, 2016, effective date for the new overtime rules remains in effect. Employers should continue making whatever changes are necessary to bring themselves into compliance with the updated regulations.
We will be sure to alert you if any developments occur that change the existing deadline.
By: Rebecca D. Stanglein, RStanglein@dsda.com