This article originally published in The Daily Record October 6, 2016.
Dec. 1, a date which will live in infamy. No, I didn’t just terribly misquote our 32nd president, Franklin Delano Roosevelt. I’m talking about Dec. 1, 2016. The date the federal Department of Labor’s revised overtime regulations are set to become effective.
Perhaps I’m being somewhat dramatic, or maybe I’m not. It appears to depend on your perspective. From the perspective of my family and friends, it is the date I will – with any luck – stop incessantly droning on about this topic. For an estimated 4.2 million U.S. employees, and their employers, it is the date those employees become eligible for overtime pay.
Enter 21 state attorneys general, more than 50 business groups, and the U.S. Congress shouting, we will not go quietly into the night! (Extra points for anyone who recognized that line from one of my favorite movies ever, “Independence Day.”)
On Sept. 20, 2016, a group of 21 states filed a “Complaint for Declaratory and Injunctive Relief” in federal court in the Eastern District of Texas. The complaint was filed against the federal Department of Labor and the Agency’s wage-and-hour division; Thomas Perez, U.S. Secretary of Labor; David Weil, Administrator of the Wage-and-Hour Division, as well as Mary Zeigler, the Division’s Assistant Administrator for Policy. The complaint mounts a three-prong attack on the updated regulations:
- The DOL “disregarded the actual requirements” of the Fair Labor Standards Act (“FLSA”), which refers only to the du- ties performed by white collar employees, with no reference to a salary basis test or indexing mechanism.
- The final rule’s automatic indexing mechanism (automatically increases the threshold salary every three years) violates the notice-and-comment rulemaking requirements of the Administrative Procedure Act.
- The new rule violates the Tenth Amendment to the Constitution by infringing upon state sovereignty and requiring states to pay higher wages or overtime to state employees performing exempt duties, effectively imposing “the Federal Executive’s policy wishes on State and local governments.”
The lawsuit focuses primarily on states’ rights, and asks the court to grant a “permanent injunction preventing the Defendants from implementing, applying, or enforcing the new overtime rules and regulations.”
Also on Sept. 20, 2016, in the same federal court, a lawsuit was filed against the Secretary of Labor, the Administrator of the Wage-and-Hour Division, and the U.S. Department of Labor, by more than 50 business groups, including the U.S. Chamber of Commerce, the National Federation of Independent Business, National Automobile Dealers Association, the National Association of Manufacturers, and the National Retail Federation.
Focused on the Administrative Procedure Act, the action alleges, among other things, that the new overtime rule “exceeds the authority of the DOL” and the other Defendants under the FLSA, and “is arbitrary, capricious, contrary to procedures required by law, and otherwise contrary to law.” The complaint goes on to allege that the new overtime rule “defies the mandate of Congress to exempt” certain “white-collar” employees from the FLSA’s overtime requirements, and increases the minimum salary threshold so high, that “the exemption is effectively lost for entire categories of salaried…employees whose job duties otherwise qualify them to be treated as exempt.”
In their complaint, the business groups explain what they believe to be the inevitable results of the new overtime rule:
The costs of compliance will force many smaller employers and non-prof- its operating on fixed budgets to cut critical programming, staffing, and services to the public. Many employers will lose the ability to effectively and flexibly manage their workforces upon losing the exemption for frontline executives, administrators and professionals. Millions of employees across the country will have to be reclassified from salaried to hourly workers, resulting in restrictions on their work hours that will deny them opportunities for advancement and hinder performance of their jobs—to the detriment of their employers, their customers, and their own careers.
Ultimately, the lawsuit asks the court to “vacate” the overtime rule. However, more immediately, it asks the court to “postpone the effective date of the Overtime Rule and…maintain the status quo pending the Court’s review of this case.”
According to Karen Harned, executive director of the small business legal center at the National Federation of Independent Business, “The Obama administration continuously proves that it doesn’t care about the small-business sector and the problems that they are facing. This administration has repeatedly used its executive power to implement new rules and regulations on the small-business community without considering the economic effects as the law requires.”
Taking a hardline stance, Secretary of Labor Perez said in a statement, “We are confident in the legality of all aspects of our final overtime rule. It is the result of a comprehensive, inclusive rule-making process. Despite the sound legal and pol- icy footing on which the rule is constructed, the same interests that have stood in the way of middle-class Americans getting paid when they work extra are continuing their obstructionist tactics.”
As if the two lawsuits didn’t create enough turbulence, on Sept. 28th the House of Representatives jumped into the fray. With all House Republicans and five Democrats voting in favor, the Regulatory Relief for Small Businesses, Schools and Nonprofits Act passed 246-177. The bill, H.R. 6094, which calls for a delay in the implementation of the new overtime rule from December 1, 2016 to June 1, 2017, will now be taken up in the Senate.
So what, if anything, does this flurry of activity mean for employers trying to prepare their employees and businesses for life under the new overtime rule? The short answer is, almost nothing. Here’s why:
- The complaint filed by Nevada, Texas, and the other states appears focused primarily on the right of the federal government to apply the FLSA to the states. This question was settled in 1985 with the Supreme Court’s landmark decision in Garcia v. San Antonio Metropolitan Transit Authority, which concluded that the Tenth Amendment does not bar Congress from applying the FLSA to the states.
- Regarding the case filed by the business groups, the vast majority of legal experts I’ve read agree that the DOL took the necessary and appropriate steps in updating the FLSA’s overtime rule, and acted well within its authority.
- With that said, there may be one possible area where the DOL overstepped. Both lawsuits point to there being no specific congressional authorization in the FLSA for the new indexing mechanism. As the lawsuit brought by the states noted, “Indexing not only evades the statutory command to delimit the exception from ‘time to time’ as well as the notice and comment requirements of the APA, it also ignores the DOL’s prior admissions [during the George W. Bush Administration] that ‘nothing in the legislative or regulatory history. . .would support indexing or automatic increases.’” With that in mind, the best businesses can hope for is that the indexing mechanism goes away.
- There also appears little hope that the court will “postpone the effective date of the Overtime Rule and…maintain the status quo pending the Court’s review of this case.”
- Although the Regulatory Relief for Small Businesses, Schools and Nonprofits Act passed the House, it still faces opposition in the Senate. Assuming it passes the Senate, it would need to be signed by President Obama. In a Statement of Ad- ministration Policy issued on Sept. 27, 2016, the Office of Management and Bud- get emphasizes, “If the President were presented with H.R. 6094, he would veto the bill.”
The bottom line for businesses is that they need to get ready, the new overtime rule will be effective Dec. 1, 2016. If for no other reason than my family couldn’t handle hearing me talk about it for even one day more!
Posted by Frank Cania, President of driven HR – A USA Payroll Company
Please feel free to contact me at email@example.com, or 855-672-4142 with questions or for more information.
Disclaimer: This content is for informational purposes only, does not constitute a legal opinion, and is not legal advice. The facts of each situation should be considered and analyzed individually. Therefore, you should always consult with competent employment counsel regarding any issues discussed here.
Click HERE to learn more about Frank Cania, author of Employers’ HR Advisor.