On September 20, 2016, 21 states filed suit in the Eastern District of Texas seeking to put the brakes on the new Department of Labor (DOL) overtime rule which raises the minimum salary for certain employees who are exempt from minimum wage and overtime requirements under the Fair Labor Standard Act (FLSA). As we noted in May, the new DOL rule raises the minimum salary for white collar exempt employees to $47,476 per year, and the rule is slated to take effect December 1, 2016.
In the lawsuit, the states alleged that the DOL rule improperly increases the salary level without proper regard for the job duties performed by employees. That is, the states argue that what matters most for determining whether an employee can meet a white collar exemption is whether the employee performs work in an executive, administrative, or professional capacity. The states also take issue with the three-year automatic update to the salary level, which has never been applied before in the context of the FLSA regulations. According to the states, this evades the FLSA's command to periodically review the white collar exceptions and to allow for notice and comment by the public. The states also argue that the new rule is unconstitutional because it impermissibly raises labor costs on state governments, and therefore effectively allows the Federal Executive branch to deplete state resources.
The states filing the lawsuit are: Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Nevada, Ohio, Oklahoma, South Carolina, Texas, Utah, and Wisconsin.
On the same day and in the same district court, more than 50 national business groups, including the U.S. Chamber of Commerce, National Association of Manufacturers, and the National Retail Federation, also filed a challenge to the overtime rule, alleging the justifications offered by the DOL for the new salary threshold do not constitute a permissible construction of the FLSA.
Of course, we do not know how these lawsuits will be decided or their impact in the near or long term. For now, the rule remains slated to go into effect on December 1 and employers should continue to prepare for the new regulations, including the increased salary level.