HR Management & Compliance

Did the DOL Exceed Its Authority? Nearly Half of the States Think So

Recently, 21 states and a few employer interest groups filed suit against the U.S. Department of Labor (DOL). Their argument is that the DOL overstepped its authority.

The suits, however, are not expected to have any success in the near future and employers would be well-served to be in compliance by the December 1 deadline, according to one expert.

Background

The DOL issued new regulations earlier this year more than doubling the salary threshold for employees eligible for overtime. Come December, employees earning less than $913 per week (which amounts to $47,476 annually) must be classified as nonexempt from the Fair Labor Standards Act’s (FLSA) overtime requirements, regardless of whether they meet any of the law’s duties tests.

The lawsuits (States of Nevada, et al. v. U.S. Department of Labor, No. 1:16-cv-00407 (E.D. Texas) and Plano Chamber of Commerce v. Thomas E. Perez, No. 4:16-cv-00732 (E.D. Texas)) allege that the DOL went too far in several respects.

First, the complaints allege that DOL’s use of the salary threshold as the main test for overtime eligibility ignores the importance that the FLSA places on an employee’s duties. The emphasis on salary “defies the statutory text … Congressional intent, and common sense,” the states’ complaint says.

Moreover, the rule’s automatic increase—which brings the threshold to $51,000 by 2020—runs afoul of federal law requiring that regulations go through notice and comment procedures, the lawsuits claim. Both point to DOL’s previous position in its 2004 rules updating the salary threshold that indexing is prohibited absent specific congressional authorization; “Invalid action does not become valid through the passage of time,” the first suit said.

The states, making these arguments as employers themselves, also alleged that the regulation violates the U.S. Constitution. Enforcing the rule against states “infringes upon state sovereignty and federalism by dictating the wages that States must pay to those whom they employ in order to carry out their governmental functions, what hours those persons will work, and what compensation will be provided where these employees may be called upon to work overtime,” they said.

Some states offered estimates of how the rule would affect them. Arkansas, for example, noted that 3,995 state employees will be newly eligible for overtime, creating overtime costs that would “far exceed” a million dollars. Arizona estimated that if it raised the salary of its 1,437 affected employees, it would cost the state $10 million. “Left unchecked, DOL’s salary basis test and compensation levels will wreck State budgets,” they said.

In response to the complaints, the DOL said it is confident in the legality of the rule. Secretary of Labor Thomas E. Perez said in a statement that these “partisan lawsuits” are obstructionist tactics aimed at preventing the department from ensuring that middle-class workers receive fair pay.

Tomorrow we’ll look at the takeaway for employers.