Texas and Nevada [press releases] filed [complaint, PDF] suit on behalf of 19 other states against the Department of Labor (DOL) [official website] Monday, challenging the Obama administration’s new overtime rule [materials]. The US Chamber of Commerce [website], representing 50 business organizations, is also suing the DOL [materials] over the same regulation. The “new Overtime Rule,” as it is referred to by challengers, was promulgated by the DOL and its Wage and Hour Division to update salary and compensation standards as well as to provide guidelines for determining who qualifies for exemption from from the Fair Labor Standards Act [text, PDF] minimum wage and overtime pay protections. The regulation raises the bar for exemption by doubling the baseline salary requirement and implementing a “duties test.” The challengers assert that the regulation did not complete the rule-making process, violates federalism in regards to wage-making provisions, and bypasses Congressional authorization. The states argue that the rule will be unduly difficult to abide by as it updates standards every three years. The states also allege that compliance will result at high costs to employers, and may lead to less hours or opportunities for employment.
In June the US Supreme Court [official website] ruled [JURIST report] in Encino Motorcars v. Navarro [SCOTUSblog materials] that it could not rely on the DOL’s interpretation of a statute on overtime pay, sending the case back to the lower court. In May the White House announced [Business Insider report] that the DOL would raise the salary threshold for overtime pay to $47,476 a year or $913 a week. The change has widespread implications [Forbes report] for businesses and nonprofits that must either raise wages for employees or pay overtime compensation. The Obama administration has maintained that the new rule will improve the lives of workers while businesses and Republicans have criticized [SHRM report] the rule stating that it will “hurt the lowest paid American workers the most.”