The U.S. Department of Labor's recent decision to alter the overtime regulation has many states and companies up in arms about the action. On September 20, several interest groups, including the National Federation of Independent Business, and 21 states have filed suit against the federal agency, according to the Wall Street Journal. The plaintiffs are arguing that the DOL is overstepping its boundaries. Triton has a closer look at the issue:
Then vs. now
It all started in 2014, when President Obama requested via Presidential Memorandum that the DOL update the rules regarding which white collar employees were covered by the Fair Labor Standards Act. At the time, the salary threshold for people to receive additional compensation based on extra hours worked was $455 per week or $23,660 per year for a full-time worker. This regulation had last been updated a decade earlier, in 2004.
On May 18, 2016, President Obama announced the approval of the new overtime rule. This updated regulation sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest wage census region, which is currently the South. Specifically, that means employees making less than $913 per week or $47,476 per year are eligible for overtime pay.
The final rule will go into effect on Dec. 1, 2016, and future automatic updates to the threshold will take place every three years beginning Jan. 1, 2020.
"Companies believe the DOL is overstepping its boundaries."
The unrest
As mentioned earlier, 21 states and a number of independent interest groups have filed lawsuits regarding the updated overtime regulation in the U.S. District Court for the Eastern District of Texas.
Those opposed to the overtime rule cite a number of arguments, according to Human Resources Business and Legal Resources. Opponents believe the salary threshold isn't an adequate way to test for eligibility for extra pay. They believe employee duties should be considered a more important element of the decision. Critics also think the automatic update portion of the new regulation overrides federal law requiring notice and comment procedures every so often. Without these practices, the DOL wouldn't be able to take companies' concerns into consideration. States, in particular, alleged the new overtime guidance violates the U.S. Constitution by mandating how much states must pay their employees, working hours and compensation for overtime – something they believe should be solely in the states' hands, Forbes reported.
Next steps for employers
While these lawsuits are bringing increased attention to the DOL's overtime rule, it doesn't look as though the federal agency is going to back down anytime soon. Those states and organizations that began legal matters will have to wait and see the results of their argument, as will the rest of the country.
In the meantime, however, it would be smart of companies to begin preparing for the Dec. 1 effective date of the overtime regulation. While the NFIB's proposal to delay the start of the mandate seems like a more likely outcome than a reversal of sorts, businesses can't rely on it. Instead, they should make sure they're adhering with the new rule to avoid compliance penalties and fines that could affect their budgets even further.
