Twenty-one states have sued the federal Department of Labor (DOL) seeking to prevent the new overtime exemption salary boost from going into effect on December 1, 2016. In a lawsuit filed in the Eastern District of Texas, the states argue that the DOL exceeded its authority when it issued its final rule increasing the salary level for exempt employees to $47,476 per year, with automatic updates to the salary threshold every three years.

Legal Challenge To The Overtime Rule

In the states’ complaint against the DOL, the states argue that the new rule is unlawful. One of their primary arguments is that enforcing the Fair Labor Standards Act (FLSA) and the new overtime rule against the states infringes upon state sovereignty in violation of the Tenth Amendment. The complaint cites the increased payroll costs to the states that would result from having to comply with the new exempt salary levels.

The states argue numerous other reasons why the new overtime rule should be stopped, including that the DOL exceeded the authority granted to it by Congress when it focused on the salary level as the litmus test for exempt status rather than on the duties of white collar workers. The states argue that exempt status should apply to any “bona fide executive, administrative, or professional” employee, even if their salary falls below the new threshold.

The states also take issue with the automatic increases in the new rule through which the DOL will index the salary thresholds every three years. The states assert that the DOL should have to go through the normal notice and comment period in order to make future changes to the salary levels.

Economic Consequences of Rule Cited By Texas AG

Texas and Nevada are leading the charge in this lawsuit, although nineteen other states have joined in. According to news reports, Texas Attorney General Ken Paxton points to the significant burdens on both private businesses as well as state and local governments that will result from the new overtime rule as reasons behind the lawsuit. He states that the increased employment costs from the higher exempt salary levels will lead to layoffs and cuts in employment, resulting in “disastrous consequences for our economy.”

Stay Tuned But Don’t Delay Preparing For Changes

The states carefully chose to file this lawsuit in a federal court that they believe will be favorable to their arguments. Until the court rules, however, employers should continue to prepare for the December 1st effective date for the new overtime rule. We will keep you informed of further developments as this case proceeds.