Uphill climb On September 20, 2016, Michigan joined 20 other states in filing a lawsuit against the U.S. Department of Labor (DOL) to block a new overtime rule that goes into effect on December 1, 2016. Here is a link to the complaint Nevada v. Labor Dept., (9/20/16).

The U.S. Chamber of Commerce and other business groups filed a similar lawsuit. Both suits were filed in the U.S. District Court in Eastern Texas. Both groups are also asking for a preliminary injunction to stop the rule from going into effect.

The states argue that the DOL exceeded its authority in rolling out the new rule. The lawsuit further argues that the DOL’s rule incorrectly focuses on the salary a worker makes instead of the duties performed, to determine overtime eligibility. They also challenge a provision that adjusts the salary threshold for inflation every three years.

DOL’s Rule Expands Eligibility for Overtime Pay

The DOL’s overtime rule would more than double the salary threshold, up to about $47,500, under which workers are automatically entitled to overtime pay. This rule focuses on shrinking what is referred to as the “white collar exemption,” which exempts employees who perform “executive, administrative or professional” duties from overtime and minimum wage requirements.

In 2014, President Obama signed a Presidential Memorandum directing the Department to update the regulations defining which white collar workers are protected by the FLSA’s minimum wage and overtime standards. Consistent with this Memorandum, the DOL announced this past May that,

This long-awaited update will result in a meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work.

It is estimated that under the DOL’s overtime rule, about 4 million workers will be newly eligible for time-and-a-half pay for all hours worked after 40 in a week. Further, the initial increases to the standard salary level (from $455 to $913 per week) and HCE total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.

Obviously, great care went into selecting where to file the lawsuits — they were filed in a federal district court division in which only one of the three serving judges were nominated by a Democratic president. As luck would have it, both cases were assigned to that judge, that judge, Hon. Amos Mazzant. Judge Mazzant also happened to be appointed by President Obama.

In a 9/20/2016 statement, Labor Secretary Perez responded to the lawsuit, in part, as follows:

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 policy 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. Partisan lawsuits filed today by 21 states and the U.S. Chamber of Commerce seek to prevent the Obama administration from making sure a long day’s work is rewarded with fair pay.

Employers Cannot Wait to Comply with DOL Overtime Rule

We will continue to monitor this litigation. However, employers cannot put off planning for the DOL’s new overtime rule in the hope that this lawsuit is successful. First, the claims face an uphill battle – both legally and because of the judge assigned to hear the case is a President Obama appointee.

Second, even if the lawsuits are successful at the district court level, an injunction would need to be issued within about ten weeks to delay the regulation’s December 1 effective date. That is not a lot of time.

Third, if the lawsuit is not successful (highly likely) an appeal to the Fifth Circuit is almost guaranteed, but that would take time.

For more information about the DOL’s new overtime rule, the lawsuits filed challenging that rule or complying with Federal overtime requirements, contact our law firm.