21 States Sue DOL Over New Overtime Rules


Key Takeaways:

  • 21 states and the US Chamber of Commerce have filed separate lawsuits against the DOL in a last-ditch effort to block the agency's new overtime rules.

  • The move comes in response to lawmakers’ inability to delay the rules in Congress.

  • An injunction is unlikely but the rules' automatic threshold increases may be vulnerable.

The US Chamber of Commerce, joined by a group of business associations and 21 state governments, is suing the Department of Labor (DOL) over its controversial new overtime rules. The lawsuits pose the most credible challenge yet to the new rules' enactment. 

 

In two separate lawsuits filed in a Texas federal court on September 20, the Chamber and 21 states took aim at the agency’s decision to raise the threshold for overtime exemption from $23,600 to $47,476. The change could lead to the reclassification of millions of workers—possibly a quarter of all exempt employees.

 

Dual Lawsuits Pose New Threat to the Rule

 

Lawmakers seeking to block or delay the rules in Congress have failed to make progress despite being backed by an impressive list of retail, business, and HR associations. Even if Congress successfully passed such a measure, President Obama (who instructed the DOL to draft the new rules) would likely veto it. Seeing this, the DOL's opponents have shifted to a new strategy—asking a federal judge for an injunction. 

 

The US Chamber's lawsuit was cosigned by the National Retail Federation, National Association of Manufacturers, National Federation of Independent Business, and a number of other business heavy-hitters. In it, the plaintiffs voice familiar objections to the new rule’s potential impact on workplace flexibility and businesses' bottom lines:

 

“The costs of compliance will force many smaller employers and non-profits operating on fixed budgets to cut critical programming, staffing, and services to the public. Many employers will lose the ability to effectively and flexibly manage their workforces upon losing the exemption for frontline executives, administrators, and professionals. Millions of employees across the country will have to be reclassified from salaried to hourly workers, resulting in restrictions on their work hours that will deny them opportunities for advancement and hinder performance of their jobs—to the detriment of their employers, their customers, and their own careers.”

 

The state-backed lawsuit takes a new approach in its attack on the rule, declaring it an unconstitutional breach of federal authority. In the lawsuit, Texas, Nevada, and a host of other state governments allege that the president could use the rule to shape state budgets, as it forces them to increase internal employee wages—stripping resources from other initiatives that the president may be ideologically opposed to.

 

"Without a limiting principle (and DOL has recognized none) the Federal Executive could deliberately exhaust State budgets simply through the enforcement of the overtime rule...by forcing many State and local governments to shift resources from other important priorities to increased payroll for certain employees, [the DOL] will effectively impose the Federal Executive’s policy wishes on State and local governments. The Constitution is designed to prohibit the Federal Executive’s ability to dragoon and, ultimately, reduce the States to mere vassals of federal prerogative.”

 

The plaintiffs have urged Judge Amos Mazzant, who is assigned to both lawsuits, to either address the lawsuits quickly or postpone of the rule’s December effective date until a decision can be reached. 

 

Injunction Unlikely, Automatic Increases Vulnerable

 

Labor Secretary Thomas Perez was quick to issue a response to the lawsuits, calling them “partisan” and defending the DOL’s new rules as legally sound. Legal experts have generally sided with Perez, finding it unlikely either suit will succeed. 

 

One other detail working against the litigants? Judge Amos Mazzant was appointed by the President Obama in 2014. 

 

The lawsuits could potentially succeed in blocking the “set it and forget it” mechanism built into the rule that automatically increases the overtime threshold every three years. The Administrative Procedures Act, which dictates how rule changes like the DOL’s should take place, requires that there be a notice and comment period before any significant change. By making threshold increases automatic, the DOL could be construed as skirting that law. Indeed, in 2004 the agency opted against automatic increases, “find nothing in the legislative or regulatory history that would support [them.]”

 

The Namely HR News team will continue to monitor the lawsuits’ status.