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States, Business Groups Challenge Overtime Rule

By ANGLE Staff posted 09-21-2016 02:13 PM

  

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Officials from 21 states yesterday filed a lawsuit challenging the Department of Labor’s overtime rule, arguing that the agency unconstitutionally overstepped its authority when it expanded the pool of workers eligible for overtime pay. A separate suit was also filed by a group of more than 50 business organizations and makes similar allegations.

The AIA has been focused on educating members on the rule (see here and here, for example), while other organizations and officials have chosen to continue fighting its implementation altogether. Tuesday's lawsuits represent the most recent of these efforts, which previously included the introduction of federal legislation, publication of economic impact studies, and various media campaigns.

Closing a Loophole

Starting December 1, salaried employees making less than $47,476 annually must be paid at least time-and-a-half when working more than 40 hours a week. That figure is more than double the current threshold of $23,600.

The new regulations were largely designed to combat the rise of “white-collar sweatshops,” a term for firms that take advantage of the many overtime exemptions that kick in for workers earning over the threshold. These businesses offer salaries that barely cross the threshold, and classify employees as “white collar” to avoid having to pay them overtime. The practice was first brought into the mainstream following a 2001 lawsuit against Farmers Insurance, filed by workers who were denied overtime pay despite putting in 90-hour workweeks. These employees reported being tasked with “assembling tacos” and “shoving merchandise onto display racks,” but were intentionally given titles like manager and team leader and paid just above the salary threshold in an attempt to skirt overtime requirements.  

DOL officials also argue that when the threshold was originally put into place it covered 60 percent of workers. Despite occasional updates, the current threshold applies to just 8 percent of today’s workforce. The Department’s contention is that the new threshold will bring that figure back up to 60 percent, in keeping with the original intent of the law.

Industry Response

The idea of raising the salary threshold has been met with considerable opposition from broad swaths of the business community since first being floated a few years back. They argue that extending mandatory overtime pay to an estimated 4 million additional workers will place an untenable burden on businesses, and negate economic gains made since the 2008 recession.

Yesterday's lawsuit filed on behalf of 21 states goes a step further, challenging the federal government’s authority to “dictate to [states] how they should budget state employee salaries,” as Oklahoma Attorney General Scott Pruitt remarked. 

states.jpgTwenty-one states filed suit on Tuesday

A separate lawsuit, filed jointly by several business groups, argues that the rule’s indexing provision (which mandates regular increases in the salary threshold to keep up with inflation) circumvents the intent of Congress. In a press release, the Associated Builders and Contractors, one of the plaintiffs, also argued that the rule is “particularly problematic for construction business owners who often need to project costs and workforce needs over multiple years for projects managed by exempt employees.”

The suits drew the scorn of labor groups, many of which have supported the new threshold. For example, Texas AFL-CIO President John Patrick said the states’ suit showed “zero concern for working people who are forced to put in free hours at the whim of their employees.”

It’s unclear what, if any, effect these lawsuits will have on the rule’s implementation. But with legislation stalled in Congress (and the President all but guaranteed to veto any bill that dismantles the statute), Tuesday's actions represent a last-ditch effort to delay or even undo the rule before it goes into effect this December.   

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Alex Ford, Manager, Federal Relations

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