States Challenge Overtime Rule

Texas, Oklahoma and 19 other states have sued the federal government to block the Labor Department’s new overtime rule, saying the Obama administration is trying to impose heavy costs and its own policy choices on the states in violation of the Tenth Amendment.

The 30-page lawsuit accuses the President of pushing through a near-doubling of the salary level at which employers are required to pay overtime. The rule calls for overtime for employees who make $913 a week, or more than $47,000 a year. That change will require states either increase pay for tens of thousands of employees or reclassify them as hourly workers and likely cut back on their time, reducing services available to taxpayers.

 The plaintiffs say the DOL “has disregarded the actual requirements of the statute and imposed a much-increased minimum salary threshold that applies without regard to whether an employee is actually performing ‘bona fide executive, administrative, or professional’ duties.”

 Furthermore, they say that the automatic indexing, which would increase the salary level for overtime every three years, is illegal, since congressional legislation is needed to set the salary level.

“It’s not the particular increase this time but the fact that every few years, without any further rulemaking, the salary level can change,” said Jesse Panuccio, a partner with Foley & Lardner in Miami and former general counsel to Florida Gov. Rick Scott. “To have this automatic change, without any assessment of the economy at the time and conditions in the workplace,” could violate the Administrative Procedure Act governing how executive branch agencies hand down new rules, he said.

The Obama administration billed its overtime rule as a long-overdue updating of regulations under the Depression-era Fair Labor Standards Act, which officials say hasn’t “kept up with our modern economy.” It creates challenges for employers to avoid regulatory sanctions or wage-and-hour lawsuits claiming employees were not compensated for answering e-mails or traveling outside of normal working hours.

In their lawsuits, the states say the 10th Amendment, which reserves for the states or the people all powers not expressly granted to the federal government, prevents the White House from decreeing wholesale changes in how much states must pay their workers.

The one-sentence Tenth Amendment is a notoriously slender peg to hang major litigation upon, however. Congress has successfully imposed regulations on state governments including environmental and workplace rules.

Panuccio of Foley Lardner said the DOL’s overtime rule threatens employers nationwide.

“The new salary level is so high employers will have to start structuring employees who truly are managerial more like traditional blue-collar jobs,” he said. “When you have to keep track of how many hours you are working to the minute, that’s the traditional punch a time clock situation.”

Fifty business groups, led by the U.S. Chamber of Commerce, have filed a separate suit challenging the overtime rule.

Source: Forbes