September 23, 2016
The Department of Labor has recently articulated changes to the FLSA overtime exemption rules. These changes are set to become effective on December 1, 2016. The new standards will set the minimum salary level required to qualify for the executive, administrative, or professional exemptions to $913 per week or $47,476 annually. This is a significant increase from the previous required salary level of $455 per week, or $23,660 annually. The proposed change will also increase the required annual compensation for the exemption of highly compensated employees to $134,004 up from $100,000. Additionally, the proposed changes would install a mechanism to automatically update the salary and compensation levels every three years thereby maintaining the standards at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region for the executive, administrative, and professional exemptions, and to the 90th percentile of full-time salaried workers nationally.
In response to these proposed changes, two law suits were filed challenging the constitutionality of the new rule changes. On Tuesday September 20, 2016, a contingent of fifty-five Texas and national business organizations filed a complaint in the U.S. District Court for the Eastern District of Texas. This group argued that the Overtime Rule changes exceed the authority of the Department of Labor. The complaint filed by the group goes on to state, “The Rule raises the minimum salary threshold so high that the new salary threshold is no longer a plausible proxy for the categories exempted by Congress.” See Complaint at 2-4, Civil Action No. 16-cv-732, E.D. Texas. The complaint goes on to explain that new minimum salary thresholds exceed the Department of Labor’s statutory authority, that the mechanism raising these thresholds every three years is in violation of the Department’s statutory authority, and that the rule changes are arbitrary, capricious, and a violation of the Administrative Procedure Act (5 U.S.C. Section 706(2)(A)).
On the same day, a coalition of 21 states, of which Ohio was a member, also filed a complaint in the U.S. District Court for the Eastern District of Texas challenging the new overtime rules. In addition to echoing the argument of the business organization that the rule changes are outside the Department’s statutory authority, the states also argue that the Department is unconstitutionally exercising Congress’ legislative authority, and that the rule changes are unlawfully encroaching on the sovereignty of the states in violation of the 10th Amendment to The Constitution of the United States.
As of yet, there has been no answer filed on behalf of the Department of Labor.