It’s highly political, economically fraught and only a few weeks away. I’m referring, of course, to the Department of Labor’s new overtime rule under the Fair Labor Standards Act. (What—did you have something else in mind?)
On December 1, the DOL intends to update the FLSA and mandate new compensation requirements for employees previously classified as exempt from overtime pay—unless, that is, a coalition of employers have their way.
Last Wednesday, October 12, 21 states filed an emergency motion for preliminary injunction challenging the rule. Here’s what you need to know about this 11th-hour legal action, which commentators describe as “the last hope” for employers looking to avoid the FLSA overtime changes:
What does the motion entail?
A preliminary injunction is a court order made before the court reaches its final verdict. Basically, it’s a way to prevent one party from doing something before the case is decided. In this case, opponents of the DOL’s new rule are asking the court to block the rule before it goes into effect in December.
The action follows up on a lawsuit the states filed in September. Several other business groups, including the U.S. Chamber of Commerce and the National Federation of Independent Business, brought a similar action against the DOL simultaneously, but have not (yet) filed their own motion for preliminary injunction.
What’s at stake?
The DOL’s new rule would increase minimum salary and annual compensation thresholds for employees exempt from overtime pay, and makes certain classifications of “white-collar” workers eligible for overtime. Additionally, the threshold would automatically increase every three years.
For many employers—and by extension, the states in which they do business—these changes translate to a significant financial burden, not only in terms of compensation but ensuring compliance with reporting requirements. According to the plaintiffs, annual costs could range by state between $1 million and close to $30 million. The automatic increases are another topic of contention, as the DOL previously stated (in 2004) that it does not have the jurisdiction to enforce such a system.
Besides the financial impact, which the states contend the DOL “grossly underestimates,” the new rule may infringe on states’ sovereignty under the 10th Amendment. In other words, opponents hold that the federal agency is exceeding the scope of its authority.
Will the motion succeed?
These changes translate to a significant financial burden, not only in terms of compensation but ensuring compliance with reporting requirements.
Maybe, but probably not. But maybe. Legal experts are divided. Some have expressed skepticism that this motion will compel the court to take meaningful action between now and December 1. Others think the injunction stands a chance of being granted, as courts have made similar decisions before.
What should employers do in the meantime?
Maybe, but probably not. But maybe. (How’s that for being decisive?)
Regardless of any future outcome, attorneys warn against assuming the states will achieve success. Employers should be careful to continue preparing to comply with the new rule, as failure to do so would be costly and any delays in implementation are unlikely.
Employers should be careful to continue preparing to comply with the new rule.
If you’re unsure whether the new FLSA overtime rule will affect your employees or organization, make sure to watch our recent webinar, “New Overtime Rule: How Dealerships Can Take the Changes in Stride.” You can find a recording of the presentation in our Resources Library.