Earlier this year, the Obama Administration announced its final ruling for overtime regulations (See our blog outlining the details of the rule here). The new rule, which would make anyone earning up to $47,476 a year eligible for overtime, goes into effect on December 1, 2016.
On September 20, officials from 21 states filed a lawsuit claiming the Administration’s rule to extend overtime pay is unconstitutional. The US Chamber of Commerce and other business groups followed suit, filing a separate challenge only hours after the states announced their lawsuit. Opponents of the rule say it will force employers to demote salaried workers to hourly positions and create more part-time jobs.
The decision to file a state lawsuit was spearheaded by Texas Attorney General Ken Paxton and Nevada Attorney General Adam Laxalt and was joined by Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Utah and Wisconsin.
Both the lawsuits of the states and the business groups say the Department of Labor abused its authority by increasing the salary threshold so dramatically, while failing to account for regional variations in the cost of living. The states’ lawsuit argues that under the rule many state employees would become eligible for overtime pay even though they perform management duties that should make them exempt. That would force states to pay workers more or resort to layoffs and other budget cuts.
The Department of Labor says the rule will extend overtime to more than 4 million workers in its first year, ensuring every worker is compensated fairly for their work.
Whether the lawsuit is successful or not, companies throughout our region should prepare to implement the new rule by December 1. To learn compliance strategies, check out the information that was shared at our Capital Conversations event, New Overtime Rules & Pail Family Leave Program: What every employer needs to know. An extended version of the presentation can be found here.
Questions? Contact Catherine Muth.