As most of you know, in May 2016 the Department of Labor (DOL) released its long-awaited Final Rule modernizing the Fair Labor Standard Act’s (FLSA) white-collar exemptions to the overtime requirements of the FLSA. See our rundown of the changes in our earlier post here. The new rule is scheduled to take effect December 1, 2016.
This week, however, 21 states banded together to express their disapproval of the Final Rule and filed a lawsuit against the DOL. The states challenging the constitutionality of the rule are: Alabama, Arizona, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah and Wisconsin.
The primary argument in the states’ lawsuit is that the new FLSA rule will force many businesses—particularly state and local governments—to unfairly and substantially increase their employment costs. For state governments in particular, the states allege that the new rule violates the Tenth Amendment by mandating how state employees are paid, what hours they will work and what compensation will be provided for working overtime. The lawsuit also alleges that implementation of the new rule will disrupt the state budgeting process by requiring states to pay overtime to more employees and would ultimately deplete state resources.
It’s no coincidence that more than 50 business groups—including the US Chamber of Commerce and the National Association of Manufacturers—filed a similar lawsuit on the same day and in the same court. This lawsuit alleges, among other things, that the new rule disregards the mandate of Congress to exempt white-collar employees from the overtime requirements of the FLSA.
How the courts will handle these parallel cases is an unknown. For now, employers—both public and private—are encouraged to proceed as though the new rules will take effect on December 1, 2016 as scheduled. That said, we encourage you to check back here for updates!