New Overtime Rules Unlikely to Be Delayed

Last month, twenty-one states sued the US Department of Labor challenging the implementation of new modernized overtime rules which promise to expand overtime eligibility to 5 million workers, including nearly all salaried employees who earn up to $47,476. Hours later, in the same federal court, fifty business groups, including the US Chamber of Commerce and several trade groups, filed a parallel lawsuit. As previously mentioned, the new rules are scheduled to go into effect on December 1 and will require employers to raise the salary of most currently exempt employees to $47,476 or pay these employees overtime pay for hours worked over 40 per week. This new minimum salary will automatically escalate every three years.

The plaintiff states argue that the new rules violate the Tenth Amendment by regulating state and local government employees’ compensation for hours worked and disrupting the governmental budgeting process. The lawsuit requests declaratory and permanent injunctive relief. The businesses’ claim is brought under the Administrative Procedure Act and argues that the new rule has set the minimum salary threshold so high that it effectively disregards Congress’ mandated exemption of white-collar employees from the overtime requirements. This lawsuit asks the court to postpone implementation of the rule pending determination of whether the rule should be vacated. Both suits focus on compliance costs.

One week after the suits were filed, the House of Representatives voted to delay the implementation of the new rules to June 1, 2017. Republicans voted unanimously for the bill along with five Democrats. The bill faces a tougher battle in the Senate, and President Obama has promised to veto the bill if it progresses.

While delay is possible, it seems unlikely. With less than 60 days until December 1, employers should plan on implementation of the new rule. This means analyzing their workforce to determine which employees are currently exempt and making less than $47,476 and whether these employees work more than 40 hours. There are many options when it comes to compliance including increasing an employee’s salary, paying overtime, reducing an employee’s hours, or implementation of the fluctuating work week which was previously mentioned.