A coalition of more than 50 business groups led by the Chamber of Commerce asked a Texas court Tuesday to throw out a new Obama administration rule intended to force employers to pay workers more overtime.
The groups argue that the Labor Department overstepped his authority by rewriting the rule rather than pressing Congress to pass new legislation.
“The [agency] went too far in the new overtime regulation,” said Randy Johnson, senior vice president of Labor, Immigration and Employee Benefits for the Chamber of Commerce. “We have heard from our members, small businesses, nonprofits and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done.”
Federal law says employees must be paid time and a half once they work more than 40 hours in a week. However, employers may exempt workers from the requirement if their duties are “managerial” in nature and they meet a certain minimum salary threshold. In May, the Labor Department announced it would set that threshold at $47,000 annually, about double the current rate. The change will take effect Dec. 1.
The Obama administration estimated that the change would would extend overtime coverage to 4.2 million additional workers. Because it was a reinterpretation of an existing rule under the Fair Labor Standards Act, congressional approval was not needed for the change, officials said. The change also requires the department to update the threshold every three years based on wage growth.
The business groups counter in the lawsuit that the new threshold is excessively high and therefore violates the intent of the overtime exemption, which was to give employers and workers flexibility in setting work schedules. The lawsuit specifically argues that the White House violated the Administrative Procedures Act, the law covering federal rulemakings. They also argue that complying with the rule is more likely to hurt the workers it is intended to boost.
“The new overtime rule will result in salaried professional employees being converted to hourly wages, and it will reduce workplace flexibility, remote electronic access to work and opportunities for career advancement,” Johnson said.
Juanita Duggan, president of National Federation of Independent Business, one of the coalition members, said her members “can’t just flip a switch” to be in compliance. “In many cases, small businesses must reorganize their workforces and implement new systems for tracking hours, recordkeeping and reporting,” she said.
That could be a significant problem for those employers.
When it announced the rule in May, Labor Secretary Tom Perez said, “We intend to pivot immediately into compliance assistance,” adding that the aim was “100 percent compliance.”
