Overtime rule draws legislation and lawsuits

Author:
Publish date:

It’s just eight weeks and counting down until dealerships will have few choices when the new overtime rules proposed by the Obama administration go into effect on Dec. 1.

Businesses will have to raise employees’ salaries above the current salary threshold of $23,360 to the new level of $47,476 to keep them exempt from overtime pay. Or they could reclassify employees as hourly, paying them time-and-a-half if they work more than 40 hours in a week. If you choose to pay by the hour, you’ll have to decide what wage to pay and whether to allow overtime at all.

Two actions, however, could delay the actual implementation of the new rules by the Department of Labor because the virtual doubling of the threshold has drawn widespread pushback from some lawmakers, states and a broad range of businesses.

First, in a late-night vote last week, the U.S. House of Representatives passed legislation to delay the new overtime rule by six months or until June 1, 2017. Dubbed the Regulatory Relief for Small Businesses, Schools, and Nonprofits Act, it was led in the House by Rep. Tim Walberg, R-Mich.

"We all agree we need to modernize our nation's overtime rules, but small businesses, non-profits and colleges and universities should not be hurt in the process," Walberg said. "The department needs to abandon this flawed rule and pursue a balanced approach. Instead, they’re forcing those who have to deal with the real-world consequences to make significant changes before an arbitrary December deadline.”

A few hours before the House vote, Sen. James Lankford, R-Okla., introduced a similar bill in the Senate. However, The Hill reports President Obama has already promised to veto it. Also on the down side, the Senate isn’t scheduled back until Nov.15 (after elections). That’s just 15 days before the implementation date.

Meanwhile, two legal challenges have been brought against the new rule. The U.S. Chamber of Commerce is claiming the Department of Labor is exceeding its statutory authority and is in violation of the Administrative Procedure Act.

The Chamber of Commerce’s lawsuit claims that by setting an excessively high salary threshold for determining which workers will qualify as "executive, administrative and professional employees," the rule violates the intent of Congress in the Fair Labor Standards Act that the Labor Department has consistently administered for more than 75 years.

In addition, the suit claims the rule results in a "one-size-fits-none" salary threshold and fails to recognize regional and industry differences that have previously been established. Moreover, the provision that will automatically update the salary threshold every three years, avoiding the rulemaking process or even taking input from affected parties, is not authorized by the Fair Labor Standards Act or any other relevant statute.

In a separate legal action, a second lawsuit was filed by the attorneys general of 21 states in U.S. District Court in Eastern Texas. Under the new rule, states are still empowered to enact their own statutes that can differ from the new federal regulations. However, businesses will still be subject to whichever requirements are more generous to employees.

The bottom line is that, so far, the Labor Department is turning a deaf ear to the concerns over the new overtime regulation. That, combined with the threatened Obama veto of any bill to delay implementation, means as a dealer you are best advised to continue becoming familiar with the mandated changes and spend time now developing your plan of action for Dec. 1.

Related