Two Lawsuits Challenge New DOL Overtime Rule

Four months after being formally announced on May 18, 2016, and a little more than two months before it is scheduled to become effective on December 1, 2016, the United States Department of Labor’s (“DOL”) new Overtime Rule has come under a two-pronged attack in federal lawsuits filed in the Eastern District of Texas. A coalition of 21 states and a separate group of more than 50 chambers of commerce and other trade associations filed separate lawsuits on September 20, 2016 seeking to prevent the Obama administration from implementing the Overtime Rule.

As previously noted on this site, the new Overtime Rule increases the annual salary threshold for exempt employees from $23,660 to $47,476. This means that employees who perform duties that otherwise make them exempt from overtime under the “white collar” exemptions set out in the Fair Labor Standards Act, but who earn less than $47,476 per year (or $913 per week), must be paid one-and-a-half times their regular hourly rate for all hours worked beyond 40 in a work week. The new Rule also increases the annual salary threshold for “highly compensated employees” from $100,000 to $134,004. Lastly, it calls for automatically increasing these salary thresholds every three years, beginning on January 1, 2020. The DOL has estimated that under the new Rule, an additional 4.2 million workers in the United States will be eligible to receive overtime – amounting to $1.2 billion in increased wages – in the first year.

Focusing on the anticipated economic harm to businesses of all sizes and to states in their capacity as government employers, both lawsuits seek declarations that the DOL unlawfully exceeded its statutory authority in promulgating the new Rule and injunctive relief to prevent the Rule from going into effect on December 1.

The Eastern District of Texas is known to have a “rocket docket,” processing cases at a rapid pace. However, employers should not sit on their hands in the hope that the judge (who is presiding over both cases), rules in the plaintiffs’ favor before December 1. Unless and until Congress or a court determines that the new Overtime Rule should not become effective in its current form, employers should continue to work toward complying with the new Rule by the December 1 deadline.

Please feel free to contact any of Beck Reed Riden LLP’s employment attorneys with questions regarding this issue.