Twenty-one states’ attorneys general, the U.S. Chamber of Commerce and more than 50 other national and Texas business groups filed legal challenges Tuesday to the federal overtime rule set to take effect Dec. 1. U.S. Secretary of Labor Thomas E. Perez, however, said he is confident that the rule will withstand the opposition.
The states’ effort, led by Texas Attorney General Ken Paxton and Nevada Attorney General Adam Paul Laxalt, holds that the rule requires congressional validation and will result in increased employment costs — and possible service cuts and layoffs — for many state and local governments, as well as private businesses. Also, the attorneys general said, law requires any change in the salary threshold to go through the rulemaking process.
The overtime rule, opposed by several associations representing senior living operators, doubles the salary threshold — from $23,660 to $47,476 per year — under which most salaried workers will be guaranteed overtime pay when they work more than 40 hours per week. That threshold will be updated automatically every three years. Overtime payment requirements last had been updated in 2004.
The U.S. Chamber, which counts among the members of its board of directors Paul Klaassen, founder of Sunrise Senior Living, maintains that the Department of Labor exceeded its statutory authority in issuing the regulation and violated the Administrative Procedure Act.
“We have heard from our members, small businesses, nonprofits and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done,” Randy Johnson, the group’s senior vice president of labor, immigration and employee benefits, said in a statement. “Furthermore, the automatic escalator provision means that employers will have to go through their reclassification analysis every three years. In combination, the new overtime rule will result in salaried professional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work and opportunities for career advancement.”
The Chamber lawsuit also charges that the rule departs from the intent of the Fair Labor Standards Act, that the salary threshold set by the rule is “excessively high” and that the threshold ignores regional and industry differences that previously had been acknowledged. The complaint also argues that the salary threshold cannot be updated without a rulemaking or input from affected parties.
Perez of the Labor Department said in a statement that he is confident in the legality of all aspects of the final rule. “It is the result of a comprehensive, inclusive rulemaking process,” he said.
The FLSA is “the crown jewel of worker protections in the United States,” Perez said, adding: “The crown jewel has lost its luster over the years. In 1975, 62% of full-time, salaried workers had overtime protections based on their pay; today, just 7% have those protections, meaning that too few people are getting the overtime that the FLSA intended.”
Perez said he looks forward to “vigorously defending” the final rule.
In July, four Democratic congressmen introduced the Overtime Reform and Enhancement Act (H.R. 5813), which has the goal of phasing in the overtime rule over three years. It was referred to the House Education and the Workforce.